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Dollar firm after retail sales jump fans recovery hopes
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FILE PHOTO: A U.S. dollar banknote is pictured behind a protective mask, which is widely used as a preventive measure against the coronavirus (COVID-19), in this illustration taken March 17, 2020. (REUTERS/Alexey Pavlishak/File Photo)
T
he dollar held firm against many of its rivals on Wednesday after US retail sales jumped far more than expected in May, while risk-sensitive currencies were hobbled by concerns about the coronavirus and diplomatic tensions in Asia.
Federal Reserve chairman Jerome Powell also doused some of the rosy expectations on Tuesday, as he painted a rather bleak picture of the US economy.
The dollar index stood at 97.003, having risen about 0.4 percent on Tuesday.
The euro traded at US$1.12635, having lost 0.5 percent on Tuesday and in consolidation after hitting a three-month high of $1.14225 a week ago.
The Australian dollar eased off 0.4 percent to $0.6861, slipping further from Tuesday’s high of $0.6977.
“In Asia, there is a bit of risk-off mood following a renewed outbreak of coronavirus in Beijing and also some geopolitical tensions in the region,” said Kyosuke Suzuki, director of currencies at Societe Generale.
China sharply ramped up restrictions on people leaving the capital on Tuesday in an effort to stop the most serious coronavirus flare-up since February from spreading to other cities and provinces.
North Korea on Tuesday blew up a joint liaison office set up in a border town in 2018 to foster better ties with South Korea, while India’s army said 20 of its soldiers had been killed in clashes with Chinese troops at a disputed border site in the western Himalayas.
Against the yen, the dollar was little changed at 107.39 yen, stuck in a narrow range so far this week.
Tuesday’s data showed US retail sales jumping 17.7 percent last month, outstripping economists’ median forecast of 8.0 percent increase.
The surge in retail sales last month recouped 63 percent of March and April’s decreases, raising hopes of a quick recovery in the consumption, the driver of the US economy.
Still, Fed chairman Powell had a word of caution in his testimony at Congress, saying a full US economic recovery will not occur until the American people are sure that the novel coronavirus epidemic has been brought under control.
That still remains far from certain, with new coronavirus infections hitting record highs in six US states, including populous Texas and Florida, on Tuesday.
