US dollar strengthens as traders see resilient US economy

• The Australian dollar rose 0.3pc to 0.6694 per U.S. dollar, pulling away from a decade-low touched earlier in the session.
• The Chinese yuan also rose 0.3pc to 6.9860 per U.S. dollar.
• The U.S. dollar, however, was stronger against other major currencies.

LONDON: A stronger U.S. dollar dragged the euro down to its lowest level in months as investors expected the U.S. economy to remain resilient to the spread of the coronavirus across the world, with payroll data from last week reinforcing traders' optimism.

Market participants were more positive about riskier currencies amid hints that the spread of the coronavirus could be slowing down and as some big businesses resumed work in China after the Lunar New Year break.

The Australian dollar rose 0.3pc to 0.6694 per U.S. dollar, pulling away from a decade-low touched earlier in the session. It has lost 4.5pc this year.

The Chinese yuan also rose 0.3pc to 6.9860 per U.S. dollar.

The U.S. dollar, however, was stronger against other major currencies.

It pushed the euro to match a four-month low of $1.0942  and dragged the pound down to a 2-1/2-month low of $1.2873, before sterling recovered and traded last at $1.2911, up 0.2pc on the day.

Versus the euro, the pound was 0.2pc higher at 84.84 pence .

"The relative attractiveness of the U.S. dollar has been boosted in the near-term by building concerns over the outlook for growth outside of the U.S., the rising probability of President (Donald) Trump winning a second term and further evidence of the ongoing resilience of the U..S economy," said Lee Hardman, currency analyst at MUFG.

"However, the Fed's reluctance to tighten policy should help to dampen upside potential for U.S. yields and the U.S. dollar," Hardman said.

According to analysts at Reuters the probability that euro/dollar will drop quickly was low, but the probability of it dropping further was high.

The safe-haven yen was trading neutral at 109.75 yen per dollar, while bonds dipped and stock markets pared some early losses with the broad appetite for risk.

"We've seen positive headlines about a few large companies all reporting that they were going to be resuming and reopening facilities in China," said Richard Franulovich, head of FX strategy at Westpac in Sydney.

Taiwan's Foxconn, a major contractor in global technology production, received approval to resume production at a plant in China's north, one person with knowledge of the matter told Reuters.

Carmaker Tesla's Shanghai factory was due resume production on Monday, a government official said last week, adding that authorities will provide assistance to the firm.

General Motors said on Monday it would restart production in China from Feb. 15 and Samsung Electronics said it plans to restart production at its TV factory in Tianjin there on Feb. 17.

Elsewhere, the Norwegian crown jumped 0.6pc versus the euro to 10.14 after Norway's consumer prices rose sharply in January from a year earlier.