The dollar held gains against a basket of major currencies on Thursday as escalating coronavirus cases in Europe stoked investor fears that fresh lockdowns would further hit the already fragile economic recovery.
The safe-haven greenback steadied against a basket of six currencies at 93.94, up 0.6% on the day.
Concerns of further damage to the economy grew as France and Germany went back into lockdown on Wednesday, as a massive second wave of coronavirus cases threatened to overwhelm Europe.
“The vibe is similar to what it was like in late February to early March,” said Rikiya Takebe, senior strategist at Okasan Online Securities, referring to the time when the coronavirus started to spread in the U.S. and Europe.
“Back then, there was a shift to dollar-buying to prevent risks in case of emergency, leading to a higher dollar. I think the current move on the market is somewhat the same,” he said.
The euro changed hands at $1.1657 per dollar. It dropped against the Japanese yen, last fetching 122 yen.
Traders also braced for volatility with the U.S. election less than a week away, while the country, like Europe, also faces an increase in coronavirus infections.
With former Vice President Joe Biden consistently leading in the polls over President Donald Trump, traders are cautiously betting on his victory and a possible “blue wave” outcome, where Democrats control both chambers of Congress.
“While Biden is taking the lead, Trump has been catching up in some parts of swing states,” said Shinichiro Kadota, senior strategist at Barclays.
“There is certainly a possibility of a higher volatility in the market if it becomes a closer battle, involving risks such as full results not being released (on the election day),” he said.