US Dollar Cautious as Risk Appetite Improves, US-China Tensions Rise

US Dollar Cautious as Risk Appetite Improves, US-China Tensions Rise

Posted Thursday, May 21, 2020 by
Arslan Butt • 1 min read

The US dollar continues to trade cautious against its major peers and loses ground against riskier currencies as markets focus on the optimism surrounding reopening of economies and progress towards recovery. At the time of writing, the US dollar index DXY is trading around 99.41.

The risk appetite in global markets received a boost with equities and risk currencies gaining strength ahead of the release of PMI figures from across the world. Although the Fed has recently cautioned that economic recovery in the US will take longer, stock markets gained over expectations that the government could unveil more stimulus efforts to support recovery.

The positive sentiment in markets has sent the safe haven US dollar lower while benefiting other currencies like the euro, Chinese Yuan and even emerging market currencies. The Australian dollar, meanwhile, has gained around 20% since the lowest levels reached during March.

The US dollar has also come under pressure lately over rising tensions between the US and China after US officials criticized China for mishandling information about the coronavirus pandemic when it began. Commenting on China’s $2 bullion contribution to WHO towards tackling the pandemic, US Secretary of State Mike Pompeo called the amount “paltry compared to the cost that they have imposed on the world.”

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