* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, June 17 (Reuters) - The U.S. dollar rose from early
lows on Wednesday as investors wary of wider geopolitical risks
sought its relative safe haven.
Sentiment was driven by record-high coronavirus infections
in six U.S. states, new cases in Beijing and clashes between
Indian and Chinese troops in the western Himalayas. The dollar edged 0.2% higher to 97.14 against a basket of
currencies =USD , lifting it 0.4% from the day's lows. The
index has bottomed out from a three-month low last week, but the
broad outlook remains cautious.
"The broad dollar outlook remains negative as investors are
cutting back on some of the extreme tail risk hedging bets in
the markets some of which were buying dollars," Ilan Solot, a
currency markets strategist at Brown Brothers Harriman, said.
Federal Reserve Chairman Jerome Powell doused some market
optimism with a bleak U.S. economic picture, while reinforcing
hopes for continued policy support. The greenback has had an inverse correlation with broader
markets in recent months, gaining when stocks are rising and
vice versa on the view that the U.S. economy is in relatively
better shape than Europe or China.
Powell said that a full U.S. economic recovery will not
occur until Americans are sure the coronavirus epidemic has been
brought under control.
That remains far from certain, with new coronavirus
infections hitting record highs in six U.S. states, including
Texas and Florida, on Tuesday. China has also sharply ramped up restrictions on people
leaving Beijing in an effort to stop the worst coronavirus
flare-up since February from spreading.
"Market players are looking to, with caution, how critical
the impact from any second wave of infections on the economy
will be," said Kazushige Kaida, head of FX sales at State
Street. "It's not that markets are pessimistic... But the length
of time people hold their positions is getting shorter." ]
The Fed's cautious message also checked momentum in the euro
EUR=EBS , which held well below a three-month high of $1.1422
hit last week. It was trading at $1.1238 on Wednesday, down 0.2%
after rallying nearly 5% since a Franco-German proposal for a
recovery fund in late May.
Brexit continued to hobble the British pound GBP=D3 , which
was steady around $1.2566, below a three-month high above $1.28
achieved this month.
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