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Dollar clings to gains on fears of new COVID-19 cases, U.S.-Sino tensions (Tuesday, May 12, 2020)

The U.S. dollar clung to gains on Tuesday on growing fears about a second wave of coronavirus infections and after the Federal Reserve played down the likelihood of negative interest rates, boosting the currency’s yield attraction.

U.S. Fed policymakers say they will do what it takes to cushion an economy crushed by widespread lockdowns aimed at slowing the spread of the coronavirus but likely stop short of cutting interest rates to below zero.

New coronavirus infections have been found in China, South Korea and Germany, where respective governments have eased lockdown restrictions.

A re-emergence of novel coronavirus cases could dent a global economic recovery which was supposed to be propelled by an injection of monetary and fiscal stimulus.

The euro was last up slightly against the U.S. currency at $1.0820, though still not too far from the $1.0636 low touched at the end of March when the pandemic sent markets into turmoil.

Other majors nursed losses, except the yen which increased by 0.2% to 107.47 versus the dollar.

The greenback was also supported by the possibility of President Donald Trump instructing a federal pension fund to not buy Chinese equities, making investors cautious on U.S.-Sino relations.