May 5, 2020 / 7:26 PM / a month ago

FOREX-Dollar advances, in line with stocks, after U.S. data; euro falls

    * Euro falls after German court ruling
    * Dollar gains after better-than-expected U.S. data
    * Graphic: World FX rates in 2019

 (Recasts, adds comments, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 5 (Reuters) - The dollar rose for a third session against most major currencies on
Tuesday, in line with U.S. stocks, bolstered by the prospect of reopenings in some American states and
countries around the world, as well as U.S. services data that was stronger than market expectations.
    Some analysts said since the onset of the coronavirus pandemic in March, the dollar has developed a
positive correlation with U.S. stocks. Typically, the dollar tends to rally when stocks are down and
financial markets are under stress.
    The dollar is still a safe haven and gains when there is chaos in the market. But when it moves in
tandem with risk assets, analysts are no longer surprised.
    "There has been a disconnect between equities and economics," said Mazen Issa, senior FX strategist at
TD Securities in New York. "So even though there is a risk rally today, the dollar's performance, in large
part, is tied to relative equity performance." 
    U.S. stocks gained on Tuesday, as did crude futures, which advanced 20%, with Brent up
around 12% as production fell and countries around the globe, including Italy, Finland and several U.S.
states, eased lockdown restrictions.
    "This is the situation we're in right now," said Issa. "With very low yields, investment alternatives
are few and far between and so what it does mean is that the U.S equity market, much like the dollar, is
more defensively structured in terms of its sectoral compositions," Issa said.
    The greenback's gains came at the expense of the euro, which weakened broadly after a German
constitutional court ruled that the Bundesbank must stop buying government bonds if the European Central
Bank cannot prove those purchases are needed.
    The decision did not apply to the ECB's latest pandemic-fighting program, a 750 billion-euro scheme to
prop up the economy, but the ruling unsettled financial markets, which had been calmed by aggressive ECB
asset purchases aimed at preventing the pandemic leading to an economic meltdown.
    The dollar, meanwhile, edged higher after data showed a better-than-expected reading for the U.S.
services sector in April. The U.S. Institute for Supply Management's non-manufacturing index fell to 41.8
last month, from 52.5 in March, but the April level was higher than the consensus forecast of
    In afternoon trading, the dollar index was up 0.2% at 99.714.
    The euro, meanwhile, fell 0.5% to $1.0850 in the wake of the German court ruling.
    The dollar gained 0.7% versus the Swiss franc, another safe-haven currency, to 0.9721 franc,
but slipped 0.3% against the yen to 106.450 yen.
    Commodity currencies rose with higher risk appetite, with the Australian dollar up 0.6% at
64.57 U.S. cents. It also rose after the Reserve Bank of Australia left its targets for the cash rate and
three-year government bond yields unchanged at 0.25%. 
    Trading was light because of public holidays in Japan and China. The yuan rose 0.2% to 7.1170
per dollar in offshore trade, recovering from a six-week low of 7.1560 hit in the previous session but
well below its range last month.
    Currency bid prices at 3:10PM (1910 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.0848        $1.0906     -0.53%         -3.23%      +1.0925     +1.0827
 Dollar/Yen       JPY=        106.4500       106.7300    -0.26%         -2.20%      +106.8900   +106.4300
 Euro/Yen         EURJPY=     115.50         116.38      -0.76%         -5.29%      +116.5600   +115.4200
 Dollar/Swiss     CHF=        0.9721         0.9649      +0.75%         +0.43%      +0.9734     +0.9647
 Sterling/Dollar  GBP=        1.2446         1.2442      +0.03%         -6.13%      +1.2483     +1.2422
 Dollar/Canadian  CAD=        1.4025         1.4083      -0.41%         +8.00%      +1.4094     +1.4007
 Australian/Doll  AUD=        0.6458         0.6426      +0.50%         -8.02%      +0.6476     +0.6418
 Euro/Swiss       EURCHF=     1.0546         1.0527      +0.18%         -2.82%      +1.0553     +1.0519
 Euro/Sterling    EURGBP=     0.8714         0.8764      -0.57%         +3.09%      +0.8767     +0.8692
 NZ               NZD=        0.6070         0.6046      +0.40%         -9.89%      +0.6076     +0.6034
 Dollar/Norway    NOK=        10.2303        10.3065     -0.74%         +16.54%     +10.3520    +10.2271
 Euro/Norway      EURNOK=     11.1000        11.2650     -1.46%         +12.83%     +11.2708    +11.1017
 Dollar/Sweden    SEK=        9.8145         9.8512      -0.96%         +5.00%      +9.9051     +9.7999
 Euro/Sweden      EURSEK=     10.6487        10.7520     -0.96%         +1.71%      +10.7781    +10.6444
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)
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