LONDON: The US dollar rebounded whilst other major currencies weakened on Friday after President Donald Trump took steps to ban transactions with the Chinese owners of two popular mobile apps.
The US dollar is rebounding after a persistent sell-off in the past few weeks on the back of a combination of rising US coronavirus infections, a steady decline in Treasury yields, and a lack of consensus in Washington over additional fiscal stimulus.
Trump on Thursday issued an executive order banning transactions with ByteDance, the Chinese company that owns the video-sharing app TikTok, and with Tencent Holdings Ltd, which owns the WeChat messaging app.
The US dollar strengthened even though data on employment in the United States is expected to come in weaker, but with expectations being so low, any surprise to the upside would push the dollar higher, analysts said.
"What matters now for currencies is still the economic outlook," said Esther Maria Reichelt, currency analyst at Commerzbank, adding that key is still which countries are emerging after coronavirus as winners.
"It's easy for the US dollar to find reason to appreciate again," Reichelt said.
Non-farm payrolls due later on Friday are widely expected to show US jobs creation slowed in July from the previous month, indicating a resurgence in coronavirus infections is undermining the economic recovery there.
The euro retreated from its highs and last traded down 0.5% at $1.1822, while the British pound also fell 0.4% to $1.3091.
Other major currencies also weakened against the dollar, including the Japanese yen, which last traded weaker versus the US currency at 105.67.
The Australian dollar fell, hurt by concerns about worsening US-Chinese relations and the Reserve Bank of Australia's downbeat assessment of the local economy. It was last down 0.5% at 0.72.
The resurgent dollar is showing that any shift in investors' appetite for risk can quickly revive demand for the US currency.
The dollar is at its most oversold level in over 40 years, investment bank Morgan Stanley said on Friday, adding it had now shifted from its dollar-bearish stance and turned "tactically neutral" on the US currency.
Implied volatility gauges in the foreign exchange market captured by the Deutsche Bank index rose back to the April levels, indicating traders were bracing for future price swings.
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