Dollar firms amid growing tensions with China, pound falls on negative interest rates

The dollar firmed on Monday as the market mood was weighed by arising global tensions with China and the prospect of negative interest rates.

The dollar firmed at 107.25 against the range-bound yen as Japan fell into recession for the first time since 2015.

The dollar steadied against Asian currencies, while the dollar index stood at 100.380. The New Zealand dollar dropped 60 cents, at $0.5934. The Australian dollar firmed slightly at $0.6425. 

The mood in the currency markets was dampened with the rising tensions between China and the United States, Europe, and Australia. This cautioned currency traders to guard up.

The latest rift in the U.S.-China tensions was the blocking of chip supplies to Huawei Technologies. Meanwhile, Australia also ran into a trade conflict with China, while the European Union leader’s biggest political ally pushed to temporarily ban Chinese takeovers of struggling firms.

The British pound fell 0.1%, at $1.2091 after a deadlock on a post-Brexit trade deal and the Bank of England considering negative interest rates.

The pound stood at a seven-week trough of 89.45 pence against the euro and a four-month low of 53.14 pence against the Australian dollar.

U.S. retail sales collapsed 21.6% year-on-year last month, while 20 million Americans filed for unemployment claims.

Fed Chairman Jerome Powell said that economic recovery would be a long road, even under the best conditions.