The dollar firmed on Thursday as the U.S.-China tensions continue to grow, building pressure on the yuan and dampening optimism about economic recovery.
The growing tensions between the U.S. and China affected both the Australian and New Zealand dollars. Both currencies retreated from two-month highs with the Aussie at $0.6621 and the kiwi at $0.6188.
As the forex market shifts to a cautious mood, the Chinese yuan hit a record low of $7.1966 in offshore trade overnight.
Commenting on the Hong Kong tension, U.S. Secretary of State Mike Pompeo said that China’s push for the security law was the latest move to “fundamentally undermine” the territory’s freedom and autonomy.
The Financial Times reported that coal traders’ and analysts’ expectations for Beijing to impose stricter import rules weighed on the Australian dollar.
China has stumbled into trade tensions with Australia amid the pandemic, while U.S. President Trump successively criticized China’s handling of the virus.
The United States is currently assessing options to sanction China over its tightening hold on Hong Kong. The options varied from tariff sanctions to restrictions on Chinese companies.
Elsewhere, the dollar firmed at 107.83 against the yen. The dollar index steadied at 98.863.
The euro last stood at 1.1021 on the dollar, while the pound traded at $1.2263.