By Gina Lee
Investing.com – The U.S. dollar was down on Monday morning in Asia, starting the week under pressure from increasing U.S.-China tensions over the latest disagreement between the two countries.
The latest tit-for-tat stemmed from the U.S. State Department’s order to close the Chinese Consulate in Houston within 72 hours during the previous week. China retaliated by ordering the U.S. to close its consulate in Chengdu on Friday, with a Monday deadline.
U.S. Secretary of State Michael Pompeo stoked the flames further last week when he suggested that Washington and its allies must use “more creative and assertive ways” to change China’s ways.
The two countries are also in disagreement over issues such as trade, Hong Kong’s national security law, Xinjiang, and Chinese claims in the South China sea.
“The common factor is the ongoing decline in U.S. yields,” Ray Attrill, head of FX strategy at National Australia Bank (OTC:NABZY), told Reuters. Yields fell as the bond market prices a slow U.S. recovery, robbing the dollar of a dependable attraction.
“The message from the end of last week is that deterioration in risk sentiment alone may not be enough to provide the dollar with any kind of meaningful, durable support. I suspect it’s going to take much more [deterioration in sentiment] to really bring the dollar’s reserve-currency safe-haven characteristics back to the fore,” Attrill warned.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies slipped 0.47% to 93.933 by 12:15 AM ET (05:15 AM GMT), continuing its slide from Friday.
The USD/JPY pair was down 0.0.47% to 105.62, with Japanese markets re-opening after a two-day holiday.
The AUD/USD pair gained 0.44% to 0.7135 and the NZD/USD pair was up 0.47% to 0.6675. The two Antipodean risk currencies, with close links to commodities and China, gained on the back of the dollar’s slump.
The USD/CNY pair fell 0.18% to 7.0014. China reported that industrial profit jumped 11.50% year-on-year in June earlier in the day.
The GBP/USD pair gained 0.39% to 1.2839.
Meanwhile, investors will be looking to the U.S. Federal Reserve, due to convene later in the week, for clues over the U.S. economic recovery from COVID-19.