LONDON (Reuters) – The U.S. dollar was set for a small weekly gain on Friday and the Australian dollar for a 1% drop this week as the threat of a second wave of coronavirus infections rattled investors.

Total cases in Germany increased by 913 to 173,152 on Thursday and the death toll rose by 101 to 7,824 after the country eased the nationwide lockdown imposed to safeguard the economy and protect lives.

New infections were recorded as well in other countries which have eased restrictions on public life, denting earlier investor optimism that economies could go back to normal soon.

As hopes faded for a quick global recovery from the pandemic, traders unloaded the trade-sensitive Aussie and moved into safer assets such as the U.S. dollar.

“The risk is clear that the opening of economies takes longer to materialise vs what markets are discounting,” said Carl Hammer, head of macro and FICC research at SEB.

The euro was last neutral versus the dollar at $1.0812, set for a 0.3% weekly loss. The common currency held its ground after German economic output contracted by 2.2% in the first quarter, as market participants were expecting.

The German economy slid into a recession after suffering its steepest quarterly contraction since the 2009 financial crisis as shops and factories were shut down in mid-March to fight the spread of COVID-19, preliminary data showed on Friday.

Moreover, the euro zone economy experienced its deepest contraction on record in the first three months of the year against the previous quarter.

“Data published since the first estimate has been generally weaker than expected and we see a risk of the first estimates being revised down for several countries,” SEB’s Hammer said.

Kit Juckes, macro strategist at Societe Generale, said that euro/dollar “is too weak already to fall fast”. The common currency had fallen to $1.0636 in March during the coronavirus- induced market rout and is now trading not far from that level.

The U.S. dollar was steady against a basket of currencies at 100.23, although set for a 0.4% gain for the week on rising Sino-U.S. tensions.

U.S. President Donald Trump signaled a further deterioration of his relationship with China over the coronavirus outbreak, saying he had no interest in speaking to President Xi Jinping right now and going so far as to suggest he could even cut ties with the world’s second largest economy.

The Australian dollar and the New Zealand dollar were both flat at 0.6461 and 0.5992 respectively. The Aussie dollar, nonetheless, was on course for a 1.1% decline since Monday.

The antipodean pair, like other majors, have struggled for traction in May as investors and authorities weigh optimism about easing virus containment measures against the risk of more infections and the sheer scale of economic damage already done.

The yen was up 0.1% at 107.09 per dollar, but has been grounding lower this week as U.S. Federal Reserve officials talked down the prospect of negative rates, also buoying the dollar.

Elsewhere, the British pound remained under pressure, falling 0.2% to $1.2207, following the British government’s reiterating its refusal to extend the Brexit transition deadline beyond December.

The Swedish crown, which took a massive hit in March was recovering and SEB estimated that on a trade-weighted basis, the currency was now at a stronger level then before the COVID-19 crisis started. The crown was last up 0.1% at 9.8035.

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