Dollar treads water against euro; yuan sinks on US-China tensions

NEW YORK, May 28 — The dollar steadied against the euro yesterday even as the common currency remained supported by news of a proposal for an economic recovery package to help the euro zone region recover from the coronavirus pandemic.

The euro was up 0.03 per cent against the dollar at US$1.09855 (RM4.78), after rising as high as US$1.10315, its strongest since April 1. The common currency gained 0.8 per cent on the greenback on Tuesday.

The European Union’s executive unveiled a €750 billion (RM3.5 trillion) plan yesterday to prop up economies hammered by the coronavirus crisis, hoping to end months of squabbling over how to fund a recovery that has exposed faultlines across the 27-nation bloc.

“We are certain Euro merits its strength based on just the high level of cooperation you are witnessing,” said Juan Perez, senior currency trader at Tempus Inc

“Euro will not falter much, unless this truly ends up not being doled out at all, which we doubt,” he said.

The euro has struggled since falling in March, when investors rushed for the safety of dollars amid increased volatility in global financial markets.

Perceived safe-haven currencies, the Japanese yen and the Swiss franc, came under pressure yesterday as investors looked past increased US-China tensions to bet on riskier assets in the hopes of a quick rebound from the economic hit from the coronavirus pandemic.

Against the yen, which tends to draw investors during times of geopolitical or financial stress given Japan’s status as the world’s largest creditor, 0.13the dollar was 0.11 per cent higher.

The greenback was up 0.3 per cent against the franc, after Swiss National Bank Chairman Thomas Jordan said Swiss monetary policy must remain accommodative.

Worries about the US response to China’s proposed security law for Hong Kong, however, kept safe-haven currencies from seeing sharper declines.

US Secretary of State Mike Pompeo said he had certified yesterday that Hong Kong no longer warrants special treatment under US law as it did when it was under British rule, a potentially big blow to its status as a major financial hub.

The offshore yuan fell to its lowest level ever against the against at 7.1966 per dollar.

Sterling retreated below US$1.23 as investor focus shifted back to the possibility of negative interest rates in Britain and comments from government officials that not much progress had been made in Brexit negotiations. — Reuters