A deterioration in US-China trade ties compounded fears of a slower recovery from the economic damage wreaked by the COVID-19 pandemic.
Beijing on Thursday planned to impose a new security law in Hong Kong which could lead to new pro-democracy protests. This move drew a warning from U.S. President Donald Trump that Washington would react “very strongly”.
Sino-American relations have worsened during the coronavirus pandemic. The U.S. has ramped up its criticism of China, blaming it for the spread of the virus, which originated in Wuhan.
Last week, the U.S. government moved to block global chip supplies to blacklisted telecoms equipment maker Huawei Technologies. The U.S. Senate also passed legislation that could prevent some Chinese companies from listing their shares on U.S. exchanges.
These tensions plus news that China has dropped its annual growth target for the first time added to concern about the fallout from the COVID-19 pandemic. This knocked oil prices down more than 5% and boosted demand for safe-havens such as U.S. government bonds.
The Bank of Japan unveiled a lending programme to channel nearly $280 billion to small businesses hit by the coronavirus. India slashed interest rates for a second time this year.
START TRADINGForex – US-China ties further worsened
The dollar rose 0.3% in overnight trading. The greenback extended its gains in early London trading, after US-China trade ties deterioration boosted demand for safe-haven currencies. Against a basket of comparable currencies, the dollar was last at 99.7. After two consecutive weeks of gains, the dollar looks set to end this week down around 1%.
The Japanese yen was up around 0.2% against the dollar, at 107.36.
Commodity currencies fell as investors sought safety. The riskier Australian dollar was down 0.7% while the New Zealand dollar was down 0.3%, against the U.S. dollar.
The euro was down around 0.3% against the dollar, at $1.092, having hit a three-week high of $1.1008 on Thursday.
Sterling edged lower on Friday against both the U.S. dollar and the euro as fresh data showed retail sales fell by a record 18%. The coronavirus crisis and US- China tensions boosted demand for the dollar.
Sterling weakened for a third consecutive day against a strong dollar as U.S.-China tensions boosted demand for safe-haven currencies. The pound was last down 0.45% versus the dollar at $1.2169 and down 0.02% against the euro at 89.60 pence.
Oil prices fell on Friday after China failed to set an economic growth target for 2020. This failure sparked concern that the coronavirus pandemic will cap fuel demand in the world’s second-largest oil user.
Brent crude fell more than 5% to $34.04 a barrel, while West Texas Intermediate (WTI) crude dropped 6.8% to $31.63.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money