Dollar Trades In Narrow Range, Yen Falls As Asia Shares Rise

TOKYO – The dollar held steady against most currencies on Monday as investors awaited data expected to show the U.S. services sector stopped contracting, in what would give further hope to an economic recovery from the coronavirus pandemic.

The euro moved in a narrow range before economic data from Germany and the eurozone that are also forecast to show a sharp rebound in corporate activity and retail sales, which would ease concerns about the economic outlook.

The yen drifted lower against most major currencies as gains in Asian share prices encouraged some risk-on trades.

A steady rise of new coronavirus infections in the United States has discouraged some investors from taking big positions in the currency market, but most market participants remain focused on the growing likelihood that major economies will continue to recover.

"When it comes to dollar/yen, recovery expectations are supporting the dollar, but worries about the virus are capping the upside," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

"The markets are focused on other currency pairs, like the Australian dollar, which is still in a clear uptrend against the U.S. dollar due to the rise in copper prices."

The dollar edged up to 107.74 yen on Monday in Asia following a 0.3% gain last week. Market activity was subdued following the July 4 long weekend holiday in the United States.

The euro rose 0.2% to $1.1270. Against the British pound, the common currency edged up to 90.29 pence. Sterling moved in a narrow range at $1.2482.

Against the Swiss franc, the dollar dipped to 0.9443.

The Institute for Supply Management's index for non-manufacturing activity due later on Monday is expected to rise to 50.0 in June from 45.4 in the previous month, indicating activity stopped shrinking.

The yen fell 0.4% against the euro to 121.41. Japan's currency also fell around 0.5% against the Australian and New Zealand dollars as risk sentiment improved.

However, the yen could quickly reverse course given the uncertainty surrounding the coronavirus, analysts said.

The onshore yuan rose slightly to 7.0570 per dollar on Monday, also drawing strength from a jump in Chinese share prices to the highest in five years as investors shrugged off concerns about diplomatic tension between the United States and China.

The Australian dollar rose 0.2% to $0.6956 on Monday in Asia following a 1.2% gain last week.

The Aussie is another market focus ahead of a Reserve Bank of Australia (RBA) policy meeting on Tuesday. Analysts expect rates will stay at 0.25% amid signs Australia's economic downturn will not be as dire as first feared.