The US dollar was slightly down on Friday, posting its first weekly drop in a month, as a sentiment boost from better-than-expected jobs data in the United States was tempered by surging COVID-19 cases.
The US Department of Labor on Thursday said that payrolls surged last month, but the reaction in currencies was limited. Even after two months of job recovery from May, the US economy has regained just more than one-third of an historic plunge of 20.787 million jobs lost in April.
Against a basket of currencies, the dollar the US dollar saw its biggest daily gains this week.
“In a week characterized by dropping FX volatility, the dollar looks to be re-establishing a gentle bear-trend as equities keep showing complacency to grim contagion news,” FX strategists at ING wrote in a note to clients.
“Such complacency still indicates the short-term outlook for risk assets is not lacking hurdles, but there is still a material chance we have seen the peak in the dollar,” they added.
Riskier currencies edged up, with the New Zealand dollar up 0.3 percent at 0.6528 versus the US dollar and the Australian dollar up 0.2 percent at 0.69395.
The Norwegian krone rose about 0.5 percent versus the dollar, at 9.487, on track for its best week since the first week of June .
The euro was little changed against the US dollar, at 1.1237. It gained against the safe-haven Swiss franc and fell versus the commodity-driven Norwegian krone.
Traders have been balancing hopes for an economic recovery with surging COVID-19 infections, particularly in the US, where infections are rising in the majority of states.
“We are surprised about an emerging consensus that a much-faster-than-expected recovery justifies support for risk assets. What we see in the latest data is just base effects, as economies exit the lockdown,” Bank of America FX strategists Michalis Rousakis and Rohit Garg wrote in note.
“We would expect global output to stabilize soon to well below pre-crisis levels. This is not a V,” they added.
US states have postponed and, in some cases, reversed plans to let stores reopen.
“The chances have risen that risk aversion will rise again over the coming days due to the negative news flow, allowing the dollar to appreciate, rather than optimism making further ground,” Commerzbank analyst Antje Praefcke wrote.
“The downside in EUR-USD still seems to be the weaker side currently,” she added.
Relations between the US and China are also in focus over China’s strategy in Hong Kong.
The US dollar rose against the New Taiwan dollar on Friday, gaining NT$0.023 to close at NT$29.609, up 0.51 percent from last week’s NT$29.762.
Turnover totaled US$752 million during the trading session. The greenback opened at NT$29.590, and moved between NT$29.420 and NT$29.620 before the close.
Additional reporting by Bloomberg and staff writer, with CNA
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