The Dollar is declining, the Play under pressure

By Peter Nurse

The u.s. dollar has traded sideways in early trade in Europe on Friday, on a background of signs of a growing appetite for risk in Europe, investors are hoping the end of the outbreak of coronavirus.

At 10.55, the us dollar index, which tracks the greenback against a basket of six other currencies, stood at 100,22, up 0.1%, while EUR/USD fell 0.1% to 1,0827 and that GBP/USD has fallen 0.1% to 1,2441. USD/JPY has declined 0.1% to 107,78.

The us president, Donald Trump has set new guidelines for the reopening of the u.s. economy, making a clear reverse in relation to the assertions made earlier in the week that he could dictate terms to the governors of the States. The guidelines contained no specific date for the measures of re-opening.

The risk sentiment has also been reinforced by Gilead Sciences (NASDAQ:GILD) has announced that clinical trials of its antiviral drug remdesivir have shown promising results in the treatment of the virus COVID-19.

That said, the dollar remains in the territory is high : after all, a shelter should remain sought after, the latest figures for applications of unemployment on Thursday have shown that more than 22 million Americans sought unemployment benefits last month.

This is compared to the currencies of emerging markets that the u.s. dollar really shows its strength, the IMF prediction that the global economy is set to contract the most since the Great Depression putting pressure on the countries that depend on external financing.

At 10.55, USD/TRY was trading at 6,9539, an increase of 0.2%. The read is now approaching the record lows reached in 2018.

The lira has long suffered from a heavy current account deficit and a private debt important denominated in foreign currencies. If one adds to this an economy that may be closed to stop the spread of Covid-19, it is easy to envisage further losses.

The oversight body for Turkish banking announced on Sunday that it imposed restrictions on the ability of local banks to conduct currency exchange transactions with foreign entities, in order to try to halt the offer and the potential drop of the read.

But these restrictions of capital may ultimately affect the willingness of lenders to respond to the massive needs of funding in the country, which would be detrimental to read on the long term.

That said, the read is far from being the currency the least performing emerging markets this year – the south african rand and the brazilian real collecting these “applause”. The dollar has risen 34 % against the rand and 30% against the real since the 1st of January.

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