Risk currencies buoyed by cautious hopes pandemic is peaking

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TOKYO (Reuters) – Risk-sensitive currencies climbed on Thursday on budding optimism the coronavirus pandemic may be peaking although the euro was dented by the European Union’s failure to agree on more support for their weakened economies.

FILE PHOTO: Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/

The Australian dollar fetched $0.6233, trading near its highest level since mid-March and extending its rally from its 17-year trough of $0.5510 touched three weeks ago.

The euro stood at $1.086, having slipped 0.35% on Wednesday, after European Union finance ministers failed in all-night talks to agree on more economic support for their coronavirus-stricken economies.

Two main sticking points were conditions for access to emergency credit lines in the euro zones’s bailout fund and the notion of issuing joint debt by the bloc, so-called “coronabonds”.

The euro’s drop overnight helped to lift the dollar index a tad to 100.120.

But the index is down 0.5% so far this week as safe-haven flows to the U.S. currency eased on rising hopes much of Europe and the United States could soon see themselves out of the worst period of the COVID-19 pandemic.

“New York reported its biggest death toll while infections hit the highest level in four days in Spain and three days in Italy,” said Tohru Sasaki, head of Japan market research at JPMorgan. “All these are negative but forecasts both from governments and experts that the peak could come within days are leading markets not to focus on those details.”

New York state on Wednesday reported the most coronavirus cases in the world, overtaking Spain, according to a Reuters tally.

More focus is on the U.S. initial jobless claim data [USJOB=ECI] due at 1230 GMT.

The average forecasts of economists stood at 5.25 million after a total of nearly 10 million claims over the past two weeks.

“Markets already know that the economy is being hit by extraordinary shocks,” said JPMorgan’s Sasaki. “Even if the number increases, it will probably surprise few people while a better reading could enhance the perception that the worst may be over and trigger a bigger market reaction.”

On top of hopes of a peak in the epidemic, commodity-linked currencies, including the Aussie, got an additional boost from hopes that major oil producing countries could agree to cut output at a video conference on Thursday.

Media reports suggested Russia would cut its output and Algeria’s energy minister said he expected a “fruitful” meeting though there remained tensions between the world’s top three producers, the United States, Saudi Arabia and Russia.

The Canadian dollar traded at C$1.4020 per U.S. dollar, not far off this week’s peak at C$1.3945. The Canadian unit has been recovering from a four-year low of C$1.4669 hit on March 20.

The yen stood at 108.85 yen per dollar and has been trading in a narrowing range so far this week.

Reporting by Hideyuki Sano; Editing by Sam Holmes

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