Dollar Up, Improving Risk Sentiment Boosts Euro and Pound

© Reuters

By Gina Lee

AiVIF.com – The dollar was up on Wednesday morning in Asia. Overnight surges gave the euro and pound a boost in early trading, alongside strong U.K. jobs data and a general improvement in investor sentiment thanks to positive U.S. retail sales data and hopes that China will ease COVID-19 lockdowns.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.07% to 103.25 by 1:22 AM ET (5:22 AM GMT).

The USD/JPY pair edged down 0.15% to 129.19.

The AUD/USD pair inched down 0.07% to 0.7024 while the NZD/USD pair inched up 0.06% to 0.6365.

The USD/CNY pair edged up 0.16% to 6.7488 while the GBP/USD pair inched down 0.03% to 1.2486.

The European common currency touched $1.0563 in early Asia trade, after rising 1.1% overnight, its largest day of percentage gains since March. The pound touched $1.2501 after a 1.4% overnight rally, its best day since late 2020, with data showing that the U.K.'s jobless rate hit a 48-year low.

These gains pushed the dollar index to its lowest in nearly two weeks.

"The pound got a boost from the very strong jobs report yesterday, and on top of that, there has been a slight improvement in the broader risk sentiment in financial markets driven by some positive news out of China on the lockdowns and strong data out of the U.S.," Commonwealth Bank Of Australia currency strategist Carol Kong told Reuters.

The Chinese city of Shanghai on Tuesday hit a long-awaited milestone of three consecutive days with no new COVID-19 cases outside quarantine zones, with authorities setting out the city’s clearest timetable to date for exiting a lockdown the day before.

On the data front, U.S. retail sales rose strongly in April 2022, with core retail sales rising 0.6%. Retail sales grew 0.9% month-on-month and 8.19% year-on-year. The data also showed that industrial production grew 6.4% year-on-year and 1.1% month-on-month.

Reflecting the improved risk sentiment, equities jumped overnight, and U.S. benchmark Treasury yields were on an upward trend, last hitting the 2.9878% mark. The higher U.S. yields also saw an end to the yen's small recent recovery, with the Japanese currency sensitive to higher U.S. rates.

U.S. Federal Reserve Chairman Jerome Powell also said at a Wall Street Journal event on Tuesday that the Fed will "keep pushing" to tighten its monetary policy until there are clear signs that inflation is slowing.

Meanwhile, the riskier Australian dollar was generally on an upward trend, boosted by the improved risk sentiment and extending a 0.8% gain on Tuesday. It was also helped by the Reserve Bank of Australia’s latest meeting minutes, published on Tuesday and hinting that the central bank will hike interest rates again when it meets in June 2022.

Cryptocurrency markets were quiet, with bitcoin little changed at around $30,400.