Dollar and yen hold advantage as risk aversion grows

TOKYO (Reuters) – The dollar and the yen edged higher on Thursday as growing concerns about a rise in coronavirus cases underpinned safe-haven demand for both currencies.

FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. Picture taken November 7. REUTERS/Dado Ruvic/Illustration

The Australian dollar fell after data showed the economy shed twice as many jobs as expected in May, highlighting the damage caused by lockdown restrictions put in place by the government to contain the outbreak.

The British pound traded in a narrow range before a Bank of England meeting where policymakers are expected to expand quantitative easing in the face of a sputtering economy and rocky trade negotiations with the European Union.

A surge in new coronavirus infections in several U.S. states and the imposition of travel curbs in Beijing to stop a new outbreak there have served as a reminder about the risks of re-opening economic activity before a vaccine has been developed.

“Upside for U.S. stocks and other risk assets has dwindled because more people are talking about a second wave of virus infections,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.

“This supports the dollar and the yen because they are both safe havens. The pound has its own problems. The British economy is not in good shape and a hard Brexit remains a risk.”

The dollar traded at $1.1256 per euro EUR=EBS on Thursday following a 0.2% gain in the previous session.

The greenback bought 0.9493 Swiss franc CHF=EBS, holding onto a 0.3% gain on Wednesday.

The yen JPY=D3 edged up to 106.86 against the dollar.

Sterling GBP=D3 inched down to $1.2557. Against the euro, the pound was little changed at 89.65 pence EURGBP=.

The onshore yuan CNY=CFXS rose slightly to 7.0735 per dollar after China’s top policymakers vowed to keep cash abundant in financial markets and further support growth.

The Australian dollar AUD=D3 fell to a session low of$0.6838, extending a pull back from a one-year high reached last week after data showed the Australian economy shed a quarter of a million jobs and the jobless rate jumped to the highest in almost two decades in May.

Across the Tasman Sea, the New Zealand dollar NZD=D3 also fell to $0.6447.

The yen rose against the Aussie AUDJPY= and the kiwi NZDJPY=, reinforcing the heightened risk aversion.

The British pound is in focus as traders brace for the Bank of England’s policy meeting later in the day.

The BOE is expected to boost its quantitative easing programme by 100 billion pounds ($125 billion), with some analysts eyeing an even larger increase amid concerns about the economic outlook.

Britain is seeking a free trade agreement with the EU, which it left on Jan. 31, but negotiators have so far made little progress, raising the risk both sides will fail to agree a deal before a deadline at the end of the year.

Reporting by Stanley White; Editing by Shri Navaratnam and Kim Coghill

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