© Reuters.

By Peter Nurse

Investing.com – The dollar was in retreat in early European trade Friday, weighed by doubts about the strength of the U.S. economic recovery as the country struggles to curb the number of coronavirus cases.

 At 3:10 AM ET (0710 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 94.627, breaching the March low of 94.650 to reach levels not seen since late 2018, and on track for its worst week in a month.

was down 0.5% at 106.33, was down 0.1% at 1.2725, while was up 0.1% at 1.1610, having reached its highest since late 2018. The euro was higher across the board profiting from an apparent ‘safe haven’ bid after the creation of a 750 billion-euro recovery fund improved the short-term political risk outlook.

The U.S. reported its first rise in since March on Thursday, with 1.416 million Americans filing for unemployment claims over the last week. This came as some states rolled back reopenings because of the Covid-19 pandemic.

There appears to be no sign that the coronavirus is stopping its relentless march across America. The U.S. on Thursday surpassed 4 million officially recorded Covid-19 cases, a quarter of which have come in just the last 15 days.

Additionally, the next U.S. fiscal rescue package appears to be deadlocked in Congress while a month-end deadline looms as some unemployment benefits are due to expire.

“U.S. exceptionalism has eroded, with perhaps only one pillar still standing — demand for big cap U.S. stocks,” said Stuart Simmons, senior portfolio manager at QIC, Bloomberg reported. “The U.S. no longer has a yield advantage, there’s no growth advantage with the recovery from the coronavirus likely to prove more challenging than other developed markets.”

Helping limit the damage in the dollar Friday, and boosting the Japanese yen as a safe yen, was the continued friction between the globe’s two economic powers, the U.S. and China.

Earlier Friday China ordered the United States to close its consulate in the city of Chengdu on Friday, responding to a U.S. demand this week that China close its Houston consulate. 

“This situation has been a catalyst for a pause in the risk-on rally, but to start seeing a reversal we would likely need to see further escalation and above all evidence that trade relations will be impacted,” said analysts at ING, in a research note.

Later Friday, the Central Bank of Russia is due to meet and is expected to cut its key interest rate again, having been on hold for the past couple of months. The ruble was a shade lower against the dollar at 71.56.

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