Dollar wobbles as fresh hopes for virus treatment prop up risk appetite

By Tom Westbrook

SINGAPORE (Reuters) – The dollar slipped on Friday after a media report on early signs that a COVID-19 treatment drug was working, as well as optimism about re-opening the world’s largest economy, encouraged investors in to riskier currencies.

The Australian and New Zealand dollars led gains, with the kiwi jumping as much as 1% to $0.6023, while the pound and euro also rose to recoup some of the past two days’ losses.

Medical news website STAT, citing a recorded discussion between doctors involved in a clinical trial, said most of 125 patients given Gilead’s remdesivir drug at a hospital in Chicago had recovered and been discharged.

Gilead said anecdotal reports do not provide the data needed to determine the safety or efficacy of remdesivir as a treatment for COVID-19 and that it expects more data will be available at the end of the month.

“The market is looking for good news – grasping and hoping and praying,” said Imre Speizer, FX analyst at Westpac. “People just want to get on the positive bandwagon.”

The dollar last sat at $1.0857 per euro and $1.2486 per pound and a fraction weaker at 107.83 yen .

The Australian and New Zealand dollars held just below session highs, with the Aussie at $0.6363 and the kiwi at $0.5998.

The dollar has closely tracked risk sentiment through the coronavirus crisis and remains at elevated levels as the safety of cash in the world’s reserve currency stays in demand.

Friday’s dip reverses two days of gains on warnings of a Great Depression-style slump in the world economy, though it is set to end the week steady as optimism returns.

U.S. President Donald Trump on Thursday announced guidelines for a return to work in the world’s biggest economy – a gradual, three-stage process dependent on robust virus testing and subject to state governors’ discretion.

But the crisis has already turned some 22 million Americans out of work, and further market moves were capped by Gilead’s staid response and more worries on the economic outlook.

Chinese gross domestic product data due around 0200 GMT is expected to show Q1 growth contracted for the first time since quarterly records began in 1992.

First quarter growth is seen dropping 6.5%, according to a Reuters’ poll of economists who also see 2020 growth at 2.5%, its weakest since 1976, the final year of the decade-long Cultural Revolution that wrecked the economy.

“The lift in sentiment defies more hard evidence of macro-economic damage,” said Michael McCarthy, market strategist at brokerage CMC Markets in Sydney.

(Reporting by Tom Westbrook; Editing by Sam Holmes)