US Dollar Gains as Traders Look Forward to Economic Activity Resuming in US States
The US dollar continues to trade strong against its major peers into Wednesday on the back of a better than expected services PMI reading even as markets look forward to some US states restarting economic activity in the coming days. At the time of writing, the US dollar index DXY is trading around 99.83.
While the US dollar typically tends to move in the opposite direction as that of stocks, lately the moves in equities and the currency have been in tandem, supported by an improvement in the market sentiment. While the greenback had initially been making gains as a safe haven currency, it continues to enjoy support over expectations of resumption of economic activity in the US even as other nations remain as badly affected or worse due to the ongoing coronavirus crisis.
The release of the US ISM non-manufacturing PMI also helped strengthen the dollar in the previous session after the reading came in higher than economists’ expectations. The non-manufacturing index fell to 41.8 during April from 52.8 in March, sending this sector into contraction, but beat economists’ forecast for a more severe decline to 36.8.
While the US dollar continues to trade strong against the Euro, commodity currencies like that AUD and NZD as well as the Chinese Yuan have managed to make some gains, benefiting from the risk-on sentiment in global markets. The euro has weakened over renewed uncertainties about the ECB’s bond purchase program and its effectiveness in protecting the Eurozone economy from the impact of the coronavirus pandemic.
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