As investors rebalance their portfolios for month-end, the dollar index dropped for the second day on Tuesday as rising stocks reflected improving risk appetite.
World stocks rose to their highest in almost six weeks as investors were cheered by better than expected corporate earnings. Several countries and U.S. states laid out plans to get back into business following the lockdowns to stem the spread of the novel coronavirus.
Further, month-end rebalancing is also negative for the greenback with the U.S. dollar likely to be sold against its peers.
Traders’ focus turns to a U.S. Federal Reserve meeting that will end on Wednesday and a European Central Bank (ECB) meeting on Thursday. They expect that at these meetings officials could provide further stimulus to their economies to fight the coronavirus.
The Bank of Japan said on Monday it was expanding its stimulus to help companies hit by the coronavirus crisis. Traders expect the Fed and the ECB to follow suit.
The Fed has led the global monetary policy response to the coronavirus pandemic by cutting interest rates to zero. The US Central bank also aggressively bought bonds and corporate credit.
British retailers suffered their biggest fall in sales since the 2008 financial crisis in the first half of April.
The U.S. goods trade deficit widened in March amid a collapse in exports of motor vehicles and parts. But overall imports continued to decline likely as the novel coronavirus outbreak disrupted the flow of goods.
START TRADINGForex – Rising stocks reflect strong earnings
The dollar index fell 0.42% to 99.64. It has risen from 99.00 at the end of March.
The euro held at $1.0821.
The Canadian dollar strengthened to a near two-week high against its U.S. counterpart on Tuesday. Plans to ease coronavirus lockdowns in a number of major economies supported risk appetite.
The Canadian dollar was trading 0.5% higher at 1.3958 to the greenback
The Australian dollar eased slightly to $0.6450, snapping four sessions of consecutive gains on optimism for a global economic re-start.
A 5% drop in benchmark Brent crude and a 13% drop in U.S. crude – an ill omen for global demand – also put the brakes on the Australian dollar. Aussie has recovered 17% from a 17-year low struck last month.
The pound inched higher against the U.S. dollar on Tuesday. Investors turned their attention to Federal Reserve and European Central Bank meetings this week. Sterling has been closely correlated with riskier assets, such as stocks, and when investors’ risk appetite increases, the pound tends to move up.
The pound was 0.6% higher at $1.2498, having risen earlier to a 1.5-week high of $1.2516. The British currency was flat versus the euro at 87.11 pence after rising to an eight-day high of 86.91 pence earlier.
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Sources: Reuters, Investing, CNN money