TOKYO (Reuters) - The U.S. dollar bounced and the yuan slumped on Friday after President Donald Trump took steps to ban transactions with the Chinese owners of two popular mobile apps.
The Australian dollar also fell, hurt by concerns about worsening U.S.-China relations and the Reserve Bank of Australia’s downbeat assessment of the local economy.
The greenback’s gains against the Swiss franc, the pound, and the euro came as investors await the release of U.S. non-farm payrolls later on Friday, which is forecast to show a slowdown in job creation.
“Trump’s comments hit Hong Kong stocks hard and helped the dollar rebound against the euro and the Aussie,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.
“The dollar has been sold quite a lot, so it could bounce a little more, but there’s uncertainty about how payrolls will turn out.”
Against the euro, the dollar rose 0.44% to $1.1824 on Friday, pulling back from its weakest in more than two years.
The British pound fell 0.37% to $1.3104, retreating from its strongest level since March.
The dollar bounced from a five-year low against the safe-harbour Swiss franc to trade at 0.9132.
Against the yen, which is also considered a safe currency, the dollar traded at 105.57, not far from a four-month low.
Trump on Thursday issued an executive order banning transactions with ByteDance, the Chinese company that owns the video-sharing app TikTok, saying the app is a threat to national security.
Trump also said he will ban transactions with Chinese firm Tencent Holdings Ltd (0700.HK), which owns the WeChat messaging app.
The bans, which will start in 45 days, mark an escalation of a row over China’s ambitions in the technology sector.
The onshore yuan fell 0.2% to 6.9670 per dollar. Offshore, the yuan headed for its biggest daily decline in two weeks.
The Australian dollar fell 0.48% to $0.7204, pulling back from the highest in one-and-a-half years, after the country's central bank cut its economic growth forecasts due to a resurgence of the coronavirus in Melbourne.
Across the Tasman Sea, the New Zealand dollar fell 0.25% to $0.6667.
The U.S. dollar has been caught in a persistent sell-off due to a combination of rising U.S. coronavirus infections, a steady decline in Treasury yields, and a lack of consensus in Washington over additional fiscal stimulus.
Analysts say the dollar will continue to fall, particularly against the euro, the yen and Swiss franc, as expectations for a V-shaped recovery from the coronavirus epidemic fade and investors take a more sanguine view of markets.
Non-farm payrolls due later on Friday are widely expected to show U.S. jobs creation slowed in July from the previous month, indicating a resurgence in coronavirus infections is undermining the economic recovery there.
Earlier this week, the five-year Treasury yield US5YT=RR hit an all-time low, and the benchmark 10-year yield US10YT=RR fell to its second-lowest ever, further reasons to shun the greenback.
The dollar index against a basket of major currencies last stood at 93.088, rising from a two-year low.
U.S. Republicans and Democrats have so far failed to reach an agreement on the cost of fiscal stimulus measures that many investors say is necessary to prevent the economy form losing more momentum.
Spot gold, another asset sought during times of heightened uncertainty, rose to a record high early in Asian trading but then fell as the dollar staged a mild recovery.
Reporting by Stanley White; Editing by Christopher Cushing and Lincoln Feast.