USD Rebounds Against EUR, Other Currencies

USD Back on Track

                On Friday USD exchange rate has rebounded against major currencies, that weakened, mainly due to the fact that President Donald Trump took action to ban transactions to sell two popular mobile apps to Chinese owners. Previously for many weeks USD had been weak as coronavirus infections were on the rise, the consensus in Washington on the fiscal aid package is still not reached and Treasury yields keeps on falling down. On Thursday USD hit the point of two-year low during early session as mixed data on US jobless claims has arrived. On Friday USD finally caught some breath as it was higher versus euro, British pound – by 0.4%, the Japanese yen that traded at 105.67, the Australian dollar which went down 0.5% to 0.72. The quick recovering of USD shows that if appears even tiny appetite for risk, dollar can quickly recover.

The Most Oversold Level in 40 Years

                According to experts at Morgan Stanley, dollar is now at the most oversold level in 40 years, and has become a neutral currency. The realized volatility, as actual moves of exchange rate, is at the highest since 2009, meanwhile implied volatility, as measured by Deutsche Bank index, came back to levels from April implying that investors are expecting even more price changes. Also traders are said to be hedging the risk of US elections in November by buying USD/CHF six-month options, and protecting against US-China tensions by buying EUR/AUD six-month options.

Trump Takes Action

                The main factor triggering US exchange rate on Friday was Trump’s action – the US President issued an executive order to ban transaction with ByteDance, the Chinese owner of TikTok, a mobile application for video sharing, and with Tencent Holdings Ltd, the Chinese owner of WeChat messaging mobile application. Even though data on US jobless claims was not quite positive and even weaker numbers on employment are expected to come, USD strengthened. Expectations for US employment numbers are so low nowadays, that any tiny surprise above forecasted level might push USD exchange rate higher. On Friday there will be published non-farm payrolls which will indicate how jobs creations looked like in July in US.

Best Euro exchange rate in a decade

                On Thursday euro was up 0.1% to 1.1869 dollars, after reaching earlier in the day a two-year high of 1.1916 dollars. But on Friday, due to good performance of USD, the common currency retreated, trading down 0.5% at 1.1822 dollars. Just in May EUR/USD was below 1.10, but in July its exchange rate rallied by 5%, making it for euro owners the best Euro exchange rate in a decade. Much of this gain was due to the deal made by European Union leaders on 750 billion euro recovery fund for economy. This will mark first time when countries will jointly borrow money. As the euro is not expected to keep this momentum throughout August, generally there is outlook of it to end this year on a high note. For a year’s time it is foreseen to trade at 1.18 dollars, similar to Wednesday’s exchange rate.