Signs of Economic Recovery Cause Dollar to Fall

On Monday, the USD fell against other currencies, with signs suggesting that the worldwide spread of coronavirus may be behind us.

As businesses in the US begin to reopen, manufacturing activity climbed slightly from an 11-year low in May, suggesting that the worst of the economic downturn is over. However, recovery from the COVID-19 pandemic could take years due to high unemployment.

Last month, China’s Caixin/Market Purchasing Managers Index (PMI) improved slightly as factory output increased.

For Europe, manufacturing PMI increased in May after April’s record low, although factory activity is still far lower than the norm. Japan and South Korea have seen the sharpest falls in activity in more than a decade.

The US dollar index (DXY) against a basket of currencies 0.40% to $98.829, the lowest since March 16th.

The euro (EUR) was up by 0.31% against the USD to $1.1132, after earlier reaching $1.1153, the highest since March 17th.

The Australian dollar (AUD) rose by 1.97% to $0.6797, the highest since January 17th.

With the United States and China trading words, traders have become increasingly weary of the USD, leading to further decline.

The USD began ta downward slide on Monday after reports that China told state-owned firms to block purchases of soybeans and pork from the United States, putting any trade deal between the United States and China in jeopardy.

This move from China comes after U.S. President Donald Trump last Friday criticized China’s plans to impose new security legislation in Hong Kong, calling for his administration to begin the process of eliminating special treatment for Hong Kong, ranging from extradition treatment to export controls.

China plans to halt more agricultural imports from the United States if Washington takes further action on Hong Kong.

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