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Riku Tanaka
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Forex
April 21 20:12

US Dollar demand stable, as Euro traders eagerly await officials’ meeting

US dollar has crept up in value on Tuesday (Apr 21), with speculators picking the haven currency as the COVID-propelled uncertainty continues to dominate the market, particularly in with oil prices.
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At 3:05 AM ET (0705 GMT), the US Dollar Index, which tracks the currency against a basket of six different peers, remained firm at 100.278, up 0.2%, while the GBP/USD pair fell 0.2% to 1.2414. USD/JPY was down 0.2% to 107.42.  

West Texas Intermediate crude contract observed a strong sell-off on Monday (Apr 21), its penultimate trading day before it expired, falling sharply into the negative for the first time, as investors and traders alike stayed away from delivery given the lack of storage availability for the present excess of the commodity.
“Oil is off its lows, but a lot of companies are going to get hit and companies could start to fail,” Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, told CNBC. “If share prices have a pullback, the dollar could see some gains as a safe haven. The only thing that’s capping the dollar is the Federal Reserve has done more quantitative easing than anyone else.”
The market is also keeping a close eye on the euro prior to Thursday's (Apr 23) EU leader teleconference, which will negotiate ways of financing the economic recovery in the region from the harm done by the COVID-19 crisis.
At 3:05 AM ET, EUR/USD down 0.2% to 1.0841.
German Chancellor Angela Merkel is probably going to feel obligated to consent to help finance the recuperation through the issuance of joint obligation, a subject which has incited intense deliberation in the Eurogroup finance minister meeting.
On Monday (Apr 20), Spain’s regulators set out the plan to put together a 1.5 trillion euro (US$1.63 trillion) stimulus fund financed through interminable obligation, and backed by the EU spending plan, in order to help European nations that were hardest hit by the pandemic.
Albeit a few reports have demonstrated that Merkel might be prepared to accept this proposal, the bond markets are reluctant to believe such speculations with spreads between the low-risk German debt and that of the Italian and Spanish reciprocals, the two nations that were hit the worst during the pandemic, at one-month highs.
“Covid-19 has proved an unpleasant reminder for the single currency of a key factor: the hesitant European crisis response and the continued lack of a risk-sharing mechanism such as automatic fiscal transfers mean the eurozone is exposed when debt sustainability in any one country is at risk,” said analysts at Danske Bank, in a research note.
Additionally significant is the fourteen day high for the USD/CNY pair following the the Chinese national bank’s decision to cut its benchmark lending rate on Monday (Apr 20), for the second time this year, in order to lower lending costs for organizations and prop up the COVID-hit economy.
Adding to drawback for the yuan were the freshly reported figures of new coronavirus cases in the northwestern region of Shaanxi, marking the first new cases in about three weeks.
At 3:05 AM ET, the USD/CNY pair increased 0.2% to 7.0829.