By Peter Nurse
Investing.com - The dollar slipped back in early European trade Friday, but remains not far off a two-week high as an increase of Covid-19 infections increased worries about a potential second wave.
At 3:10 AM ET (0710 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 97.352. The index had earlier climbed to a daily high of 97.495, a level not seen since the start of this month.
USD/JPY dropped 0.1% to 106.91, while the risk-sensitive AUD/USD rose 0.2% to 0.6867.
An uptick in coronavirus cases in many U.S. states this week, along with rising hospitalizations, have prompted worries that some of the social distancing measures that have been lifted as the states reopened may have to be reintroduced.
More than 150 new cases have also been detected in Beijing since last week, prompting a lift in the city's alert level and a reintroduction of travel curbs.
Additionally, the initial jobless claims figures on Thursday showed an improving employment market, but the progress is slowing and suggests the recovery will take time.
Elsewhere, the euro was up 0.1% at $1.1212, a little above a two-week low of $1.1186 touched on Thursday.
EUR/USD is down around 0.4% this week, but still up 2.1% over the month, as questions grow about the political viability of the European Union's stimulus plan.
The bloc's 27 national heads get together Friday via a video conference to discuss the European Commission’s proposal to borrow 750 billion euros against the EU budget to try and boost the region’s recovery from its unprecedented economic downturn.
There are major disagreements over the size of the recovery package, and whether two-thirds of it should be paid to member states in grants as the commission proposes.
“The latest noises make an agreement already there seem unlikely (we think a deal may be struck as late as end-July),” said analysts at Danske Bank, in a research note, “but it will still give some clues whether the market EURphoria of recent weeks was warranted or whether the initiative is on course to be meaningfully watered down.”
Elsewhere, GBP/USD pushed 0.2% higher to 1.2452, helped by a jump of 12% in retail sales in May, rebounding partly from the record fall of 18% the month before.
Sales were boosted by a 42% rise at household goods stores, with DIY shops and garden centres reopening.
That said, the pair is just above a two-week low at 1.2403, following the Bank of England’s decision Thursday to increase its bond buying by just 100 billion pounds through 2021.
“We think it is likely that the BoE needs to expand the QE programme by GBP50-100bn in the autumn,” Danske Bank said.
Later Friday, Russia’s central bank is scheduled to meet, and is widely expected to cut its benchmark rate by one percentage point to 4.5% with forward guidance possibly showing further cuts are in the making.