By Gina Lee
The dollar was higher Monday morning, as tensions between the United States and China have intensified over the weekend.
The us dollar index, which tracks the greenback against a basket of other currencies increased from 0.3% to 99,433 at 10: 30am while the two countries have waged a war of words on the origin of the virus COVID-19.
The us president, Donald Trump has thrown the first stone on Thursday, stating that the virus could have come from a laboratory of virology, Wuhan. It has also accused China of having poorly managed the pandemic which has resulted, and has threatened to impose new duties of customs in Beijing.
China has refuted these claims.
The strategist-monetary-Deutsche Bank (DE:DBKGn), George Caravels, told CNBC that if the United States imposed capital controls to China, this would be negative for the dollar as this decision would imply the output of dollar-denominated assets.
“If the decision is motivated by political reasons, the dollar would be clearly negative in our eyes. This would lead to a shift of foreign exchange reserves from the dollar to the euro, the yen, the pound sterling, the gold and other currency substitution”, he said.
During this time, the pair USD/CNY remained stable at 7,0622 after the YUAN fell to its lowest level in a month against the dollar on Friday.
The pair USD/JPY fell 0.16% to 106,75.
The pair AUD/USD lost 0.09% to 0,6412, its lowest level since Tuesday. The pair NZD/USD slid 0.28% to 0,6050.
The pair GBP/USD was down 0.43% at 1,2448.
During this time, some investors have seen the recent measures easing of lock-in some countries as being positive for the dollar.
“Given the magnitude of the impact of the COVID-19, certainly there is a high risk that geopolitical tensions worsen considerably as the measurements of the lock are reversed,” said CNBC Derek Halpenny, research manager at MUFG.
“This would clearly be another blow to global trade that would add a layer of support to dollars in the future,” he added.
