The U.S. dollar reached a two-month high on Thursday as concern grew over the resilience of an economic recovery in the United States and Europe amid a second wave of coronavirus infections.
The dollar benefited from another spike in coronavirus cases in Europe, which boosted its safe-haven appeal, while Federal Reserve policymakers called on the U.S. government to provide more fiscal support, fuelling a bout of selling in risky assets overnight.
Against a basket of six other currencies, the dollar edged up 0.1% to a two-month high at 94.50. It is up nearly 2% so far this week as economic momentum shows signs of fading.
“Optimism on the recovery, optimism on the virus, and bets on stimulus were keeping markets well bid, and on all three of these issues, there has been a degree of disappointment this month,” said John Velis, an FX and macro strategist at BNY Mellon.
Appetite for riskier assets soured after data on Wednesday showed U.S. business activity slowed in September and new restrictions to stem a surge in coronavirus infections in Europe hit the services industry.
Some investors are watching the Australian and New Zealand dollars, which have come under pressure on growing expectations their central banks could deliver more monetary stimulus. A decline in commodity prices is expected to increase downside risks for both currencies.
The Aussie fell 0.45% to $0.7042, near its weakest since July 21.
U.S. Federal Reserve Vice Chair Richard Clarida said on Wednesday that the U.S. economy remained in a “deep hole” of joblessness and weak demand and called for more fiscal stimulus, adding that policymakers “are not even going to begin thinking” about raising interest rates until inflation hits 2%.
Other safe-haven currencies, including the Japanese yen and the Swiss franc, also held firm.
The British pound swung between gains and losses but held above $1.27 before an announcement of Britain’s plans to protect jobs and employment later in the day.
– Reuters