SINGAPORE, April 22 — The US dollar and yen held broad gains today, as a bounce in oil prices failed to calm market nerves, with the week's rout and frail fuel demand underlining a grim outlook for the global economy.
The greenback sat just below a two-week peak against a basket of peers, and barely budged against commodity currencies whacked by the oil collapse, even as US crude jumped 20 per cent.
The safe-haven Japanese yen held at 107.83 per dollar and both the US currency and yen were steady against the oil-sensitive Canadian dollar and Norwegian krone. The Australian dollar battled to pull ahead, but hit resistance around US$0.6300.
“The bears are certainly getting the upper hand,” said Chris Weston, head of research at Melbourne brokerage Pepperstone, adding that it was hard to bet against the dollar in such a climate.
The recovery in US crude lifts it out of negative territory, but at just shy of US$14 (RM61.24) a barrel, it is still some 80 per cent under January's peak as cratering energy consumption due to coronavirus lockdowns creates a supply glut.
The plunge has soured appetite for risk and seems to have halted a rebound in stock markets as investors brace for a longer and slower global economic recovery.
“The oil reality check has triggered a reassessment across risk assets,” said National Australia Bank FX strategist Rodrigo Catril. “The US dollar is again showing its safe haven attributes.”
The greenback has gained half a per cent this week on a basket of currencies and stands near multi-week highs against currencies of oil exporters such as Russia, Norway and Canada.
It advanced against most Asian currencies today and gained most on the New Zealand dollar, rising about 0.3 per cent to US$0.5959 after the Reserve Bank of New Zealand's governor yesterday again raised the prospect of negative rates.
The euro remained rangebound, holding at $1.0856, while the British pound held near a two-week trough after a gloomy assessment of recovery prospects from the Bank of England's chief economist.
His evaluation that a swift recovery is by no means certain comes as countries around the world adopt a cautious approach to re-opening.
Australia's central bank governor, Philip Lowe, said yesterday that the country is likely to experience its biggest contraction in output since the 1930s, and that a quick return to business as usual should not be expected.
“The fall in commodity and equity prices is a signal market participants expect the world economy to remain weak for some time, even once the lockdowns are eased,” said Commonwealth Bank of Australia FX analyst Joe Capurso.
“We expect the weak world economy to bear down on the Australian dollar and for the Aussie to oscillate around $0.6000 in coming months.” — Reuters