By Peter Nurse
The u.s. dollar rose Tuesday, with investors opting for refuge in the face of uncertainty inspired by the coronavirus, in particular on the oil markets.
At 10: 00, the u.s. dollar index, which tracks the greenback against a basket of six other currencies, stood at 100,35, up 0.3%, while GBP/USD fell 0.3% to 1,2399. USD/JPY was down 0.2% to 107,39.
The contract WTI for the month of may has been sold in mass on Monday, his second-to-last trading day prior to its expiration, plunging into negative territory for the first time since the start of trading, investors and traders desperately seeking to avoid the delivery given the lack of storage space for the overabundance current oil.
“The oil has reached its lowest level, but a lot of companies will be affected and companies could begin to go bankrupt,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, with CNBC.
“If the price of the shares declines, the dollar could see some gains as a safe haven. The only thing that limits the dollar is that the federal Reserve has done more qe than anyone else.”
The euro is also on the agenda of the virtual meeting of EU leaders, which will take place Thursday and will focus on the financing of the economic recovery in the region after the devastation caused by the epidemic of sars coronavirus.
At 10: 00 am, EUR/USD declined by 0.3%, to 1,0825.
The German chancellor Angela Merkel is expected to come under pressure to accept to contribute to the financing of the recovery from the issuance of common debts, a topic that has sparked lively discussions at the meeting of the Eurogroup of finance ministers, which was preceded by a videoconference on Thursday.
On Monday, the Spanish government has presented its project creation of a fund for the recovery of 1 500 billion euros (1 $ 630 billion) financed by perpetual debt, with the support of the EU budget, to help countries most affected by the crisis of the sars coronavirus.
Although some reports have indicated that Merkel could be ready to accept this plan, the bond markets do not usually anticipate, with gaps of a month between the German debt at low risk and that of the equivalent Italian and Spanish, the two countries hardest hit by this crisis.
“Covid-19 proved to be an unpleasant reminder for the single currency to a key factor : the response a hesitant Europe to the crisis and the continuing absence of a mechanism to share risks such as the fiscal transfers are automatic means that the euro area is exposed when the debt sustainability of a country is threatened”, said the analysts of the Danske Bank, in a research note.
It should be noted also the record of two weeks for the pair USD/CNY following the decision of the chinese central bank to reduce its lending rate reference Monday, for the second time this year, in order to reduce borrowing costs for businesses and support the economy hit by the coronavirus.
The new first new case of coronavirus in the province of Shaanxi, in the north-west of the country, in almost three weeks, has worsened the situation of the yuan.
At 11: 00 am, the pair USD/CNY has gained 0.2% to 7,0890.