The Economist from Riyadh
The US dollar suffered the two issues yesterday as dealers expected to further facilitate the Federal Reserve’s (monetary policy) monetary policy after it cut interest rates by 50 basis points this week in an exceptional move to protect the economy from the aftermath of the Corona virus.
According to “Reuters”, analysts highlighted that the US central bank mentioned the virus 48 times in the latest “Beige Book” reports, after it had completely overlooked it in previous reports, which indicates deep concerns among policymakers about the negative impact of the virus on the economy.
As a result, the US currency remained near its lowest level in two months, retreating at 1.1132 against the euro, little changed from the previous session, and the euro also benefited from the dealers liquidating positions earlier.
And the dollar fell 0.3 per cent to 107.28 yen, not far from the five-month low of 106.85, which tumbled yesterday.
The Canadian dollar followed its American counterpart and fell 0.2 per cent to 1.3407 against the US dollar, after the central bank of Canada also cut interest rates by 50 basis points – its largest reduction in ten years – and kept the door open for further easing.
The Bank of England has so far refused to bow to pressure, keeping interest rates unchanged, and as a result, the British pound hit a six-day high of $ 1.2903 and a three-day peak against the euro at 86.22 pence.
Moreover, gold rose yesterday due to purchases of a demand for safety fueled by fears about the fast-spreading Corona virus, but an increase in stock markets limited the gains of the metal.
The spot price of gold increased 0.2 percent to $ 1638.70 an ounce, and US gold futures fell 0.2 percent to $ 1639.50.
“When we see support for gold and the dollar together, it is an indication of a desire for safe haven from investors,” said Michael McCarthy, chief market strategist at CNC Markets.
The non-revenue gold was backed by the Federal Reserve suddenly cutting interest rates last Tuesday to protect the world’s largest economy from the consequences of the epidemic.
Asian stocks rose, following the gains of the American market, after a strong performance by Joe Biden, the former US Vice President in the campaign to win the Democratic nomination for the presidential elections.
“If this stock rally continues for three or four days, then markets may treat it as a green light in terms of the economic impact of the virus and we may see pressure on gold. The situation is very volatile,” McCarthy believes.
In other metals, palladium fell 1.9 percent to $ 2527.21 an ounce, and ANZ bank analysts see in a note that “the auto sector supply chain will be affected by the Covid-19 virus. However, this demand shock is expected to have a limited impact in Palladium, due to its structural deficit, and we see scope for further setbacks following the recent upsurge. “
The metal used in automobile exhaust systems fell by as much as 13 percent on February 28, after a record rally that took it to an all-time high of $ 2875.50 on February 27 due to an acute supply shortage.
Silver rose 0.1 percent to $ 17.20 an ounce, while platinum lost 0.2 percent to $ 871.10.