The dollar edged higher on Wednesday as worries about the U.S. response to China’s proposed security law for Hong Kong supported safe-haven demand for the greenback.

The euro held gains against the dollar and the pound but faces a severe test when the European Commission is expected to release details of a financial rescue fund for the bloc later on Wednesday.

Financial markets have been caught in a tug-of-war between optimism and pessimism about the global outlook.

Some investors are betting on a resumption of normal economic activity following the crippling coronavirus pandemic, but others worry the threat of U.S. sanctions against China for its treatment of Hong Kong could easily worsen risk sentiment yet again.

The dollar edged up to $1.2321 against the pound on Wednesday in Asia, pulling away from its lowest level in two weeks.

The dollar traded at $1.0983 per euro, close to a one-week low.

It bought 0.9655 Swiss franc in Asia, nursing a 0.6% loss in the previous session.

The Australian dollar fell 0.3% to $0.6636, while the New Zealand dollar fell 0.2% to $0.6185 as worries about U.S.-China tensions hurt demand for riskier assets.

Source : Reuters