The dollar was down on Friday morning, touching two-year lows and on its way to posting its biggest monthly decline in a decade as fresh doubts over the U.S economy’s recovery from the COVID-19 pandemic creep in.
These doubts have led investors to question the dollar’s strength. Data released on Thursday showed that the U.S. economy contracted by 32.9% in the second quarter and that 1.434 million unemployment claims were submitted in the week ending July 25.
On the political front, Republicans and Democrats are also no closer to reaching consensus on the latest stimulus measures, with only one more day left before some earlier measures expire on Friday.
Ever-rising numbers of COVID-19 cases also continue to pose a challenge to the U.S.’ economic recovery. The country reported almost 4.5 million cases as of July 31, according to Johns Hopkins University data, and continues to hold the dubious honor of recording the highest number of COVID-19 cases globally.
“At the root of the dollar’s weakness is the fact, which was highlighted by Fed Chairman (Jerome) Powell the other day, that U.S. coronavirus cases started to increase in mid-June, curbing consumption and sending the economy downhill,” Daisuke Uno, chief strategist at Sumitomo Mitsui (NYSE:SMFG) Bank, told Reuters.
Meanwhile, U.S. President Donald Trump added to the dollar’s woes on Thursday after he floated the idea of delaying the U.S. presidential elections, currently scheduled for November 3. But the proposal was immediately rejected by Congress, the sole governmental authority that could make such a change.
“The mere suggestion by Trump of a delay does play to concerns that the election result will be challenged in November (should Trump lose), and that, because of the likely larger than usual share of votes via mail in ballots due to the pandemic, we might not now (get) the result on election night itself,” Ray Attrill, Head of FX Strategy at National Australia Bank (OTC:NABZY), told Reuters.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies slipped 0.28% to 92.645 by 9:53 AM ET (2:53 AM GMT).
The USD/JPY pair was down 0.45% to 104.25.
The AUD/USD pair gained 0.34% to 0.7218 and the Dow Jones New Zealand (USD) pair was up 0.04% to 0.6701.
The USD/CNY pair slid 0.30% to 6.9870. The country’s National Bureau of Statistics said that the official manufacturing purchasing managers’ index (PMI) for July was 51.1, indicating expansion in factory output.
The GBP/USD pair gained 0.29% to 1.3131.