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Little movement as pandemic continues to hit forex markets

Chris Lee

Little movement as pandemic continues to hit forex

The global foreign exchange markets appeared to remain hamstrung between risk-on and risk-off modes of trading on Friday as the uncertainty around what might happen next in the coronavirus pandemic continued to surge.

The US dollar managed to hold firm as trading began in Asia, though it was stuck in a tight band that it seemed unable to get out of.

The coronavirus pandemic has led a good number of traders to avoid making a decisive move towards the riskier global currencies, especially as indicators that the coronavirus pandemic is far from over continue to emerge.

However, on Friday, traders appeared to be hedging their bets, with few currencies across the globe showing big movements.

It is possible that the caution and consequent relative lack of movement will continue on Friday due to a number of factors.

One is the Independence Day holiday in the US, which kicks off on Friday and will see Americans enjoy a long weekend.

This could decrease trading volumes, as often occurs when banks in major economies close down temporarily.

However, it could also lead to local governments in the country making pandemic-related decisions to restrict the opportunities for Americans to move around and see others during their time off.

There have been a number of concerns in recent weeks that the US could be becoming a hotspot for the pandemic, with some regions of the country still reporting a persistent problem with the disease.

Another factor in play is likely to be the ongoing situation in Hong Kong, where Western countries such as the US and Britain appear to be taking a stand against China.

The latter imposed a new security law on the city this week, and the response in some countries around the world has been strong.

In the US, for example, federal senators unanimously decided to punish banks that choose to offer services to senior Chinese government figures involved in the new law.

All of this uncertainty so far appeared to benefit the dollar somewhat, with analysts suggesting that this could continue as the day goes on.

The currency was spotted holding firm against a number of the world’s so-called safe-haven currencies as the day continued.

Against the Swiss franc, for example, it was spotted at 0.9469.

Up against the Japanese yen, meanwhile, it was seen at 107.50.

However, it appeared to be too early to wholeheartedly dismiss the suggestion that riskier currencies were about to decline spectacularly.

The Australian dollar, for example, was spotted holding firm in its pair against the greenback and was seen at $0.6917 at one stage.

May’s retail sales information was due out and was expected to reveal a big rise.

Elsewhere, the uncertainty around what could come next in the battle between the US and China was reflected in the stagnation of the offshore Chinese yuan – which is the side of the Chinese currency that is traded on the open international markets.

This currency was spotted at 7.0732 to the US dollar at one stage, which reflected not much difference on its previous position.

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Chris Lee
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