LONDON: The euro briefly hit its strongest level since mid-March on Monday and trade-sensitive currencies including the Australian dollar rallied as investors took cheer from signs that some economies may be through the worst of the coronavirus downturn.
Investors were also relieved that U.S. President Donald Trump made no move to impose new tariffs on China during a news conference on Friday when he outlined his response to Beijing’s tightening grip over Hong Kong.Economic data suggested the collapse in manufacturing output may have found a bottom in some countries, report agencies.
In China, the Caixin/Markit Purchasing Managers Index (PMI) showed a marginal but unexpected improvement in factory activity last month.
In the euro zone, the manufacturing PMI recovered somewhat in May from April’s record low, although factory activity still contracted heavily. Japan and South Korea, however, saw the sharpest falls in activity in more than a decade.
The Australian dollar was the stand out performer, surging as much as 1.3% to a four-month high of $0.6772.
The Aussie is now up more than 20% from March lows. It gained steadily through May as the country brought the coronavirus under control and started June with a jump as the price of iron ore - Australia’s top export - hit record highs.
The euro gained, rising 0.4% to $1.1154 before falling back to trade flat at $1.1115.“We turn strategically bullish on EUR/USD following the EU debt recovery fund proposal,” Morgan Stanley strategists said, referring to the European Commission’s proposals for a 1.85 trillion euro fiscal package.
The strategists, who expect more easing from the European Central Bank when it meets on Thursday, recommend buying the euro with a target of $1.155 - a level the single currency last traded at in January 2019.