Dollar weakens on risk-off trading
The US dollar fell slightly amid further risk-off trading in the markets. Risky assets – equities and commodities – are lower. Safe-haven assets – bonds, gold and two currencies, the Swiss franc and Japanese yen, are higher. Dollar weakness may be the result of unwinding of long dollar positions accumulated since the beginning of the year or from positions adjusting ahead of Super Tuesday with anti-business Bernie Sanders, the leading Democratic presidential candidate.
February 27, 2020
EUR/USD 1.0983 GBP/USD 1.2892 USD/CAD 1.3360 AUD/USD 0.6583 USD/JPY 109.841 USD/CNH 7.0119 USD/ILS 3.4384 USD/MXN 19.4625 USD/CHF 0.9685 USD/INR 71.6650
The dollar is under modest pressure today as traders assess overbought positions and US politics. The dollar has been in demand since the turn of the year, and now represents its biggest long position in over a year. Politics are heating up as analysts are starting to think about the negative impact on our economy with a Bernie Sanders presidency. Finally, higher odds of a Fed cut in April and collapsing US Treasury yields represent headwinds for a stronger dollar.GBP
The UK pound fell as Boris Johnson is beginning the EU/UK trade negotiations with threats of a hard line approach. Also, traders are reacting to talk that the UK’s new finance minister may not increase fiscal spending as much as expected.EUR
The euro outperformed overnight, gaining nearly 1% versus the dollar. Traders had been accumulating bearish positions in the euro over the last month, believing that the export-led eurozone economy was particularly vulnerable to the coronavirus. Now, with more countries seeing increased cases of the virus, traders may be reversing overstretched euro short positions.CAD
The Canadian dollar weakened to its lowest level versus the US dollar since last June. Traders are reacting to lower oil and other commodity prices important to Canada’s economy, and growing expectations of a rate cut by the Bank of Canada. There are no key economic releases in Canada today.ASIA/PACIFIC
The Chinese yuan rallied slightly and approaches the key 7.00 level. Traders were encouraged with news that China’s economy is running at 60-70%, up from 50-60% a week ago.
The Japanese yen made small gains overnight amid increased demand for the safe-haven yen. Currency options trading showed heightened expectations for outsized gains in the yen over the coming months.