Currencies

Dollar gains as virus concerns dents risk appetite

U.S. dollar bank notes are arranged for a photograph on September 7, 2017 in Hong Kong.
studioEAST | Getty Images

The U.S. dollar rose on Thursday on safety buying as fears grew over a rapid rise in coronavirus infections in some U.S. states and as trade tensions between the United States and the European Union increased.

The governors of New York, New Jersey and Connecticut on Wednesday ordered travelers from eight other U.S. states to be quarantined for two weeks on arrival, as COVID-19 infections surged in regions spared the brunt of the initial outbreak.

"It's really fast accelerating in a lot of U.S. states, which is going to continue to be a problem for markets," said Erik Nelson, a macro strategist at Wells Fargo in New York.

Data on Thursday showed weak demand is forcing U.S. employers to lay off workers, keeping new applications for unemployment benefits extraordinarily high, even as businesses have reopened.

New orders for U.S.-made capital goods rebounded more than expected in May, but recouped only a portion of the prior two months' declines.

Forex markets have been closely following moves in equities as risk sentiment changes. Stocks opened lower on Thursday following their worst day in two weeks.

The U.S. dollar index was last up 0.3% on the day at 97.42.

A dispute between the United States and the European Union, in which Washington is flagging possible changes in tariffs on EU goods, also hurt risk sentiment.

The euro was weighed down as riskier assets in the region, including Italian bonds, weakened, and as the European Central Bank fought back against a German court challenge to its money-printing plans.

"There's a little bit of unease going on in the European financial markets, which is probably weighing on the euro," said Nelson.

The ECB also said it will offer euro loans against collateral to central banks outside the euro area to backstop funding markets amid the coronavirus pandemic.

The euro was last down 0.31% at $1.1215.

The dollar gained 0.17% against the Japanese yen to 107.2 yen.

The Canadian dollar was little changed on the day after weakening on Wednesday, when Fitch Ratings cut the country from AAA, warning of a ballooning government deficit caused by public spending related to the pandemic.

The loonie last traded at $1.3638.