COVID-19 fears push dollar higher, pounds, others fall

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By Gideon Adonai

US dollar is rising to its highest since early April despite the surging cases of COVID-19, but other currencies continue to plummet as at Wednesday.

Inflation concerns among investors have been replaced by the Delta variant of Coronavirus; consequently making global stocks to drop sharply on Monday.

Reuters business reveals that the dollar held firm during the Asian session but rose as European markets opened.

Versus a basket of currencies, the dollar was up 0.2% at 93.166 at 0718 GMT, its highest in 3.5 months.

“COVID market fears looked too low a month ago, now perhaps a bit high,” Elsa Lignos, global head of FX strategy at RBC Capital Markets, wrote in a client note.

Lignos said she expected the fears around the Delta variant to fade as vaccine take-up rises, unless a new more infectious variant of the virus emerges.

The Australian dollar, which is seen as a liquid proxy for risk appetite, fell to its lowest since November 2020, down 0.5% on the day at $0.72905, while the New Zealand dollar was also close to eight-month lows.

Australia’s two largest states reported sharp increases in new COVID-19 cases on Wednesday, a blow to hopes that lockdown restrictions would be lifted as more than half the country’s population was subject to stay-at-home orders.

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The British pound, which on Tuesday hit its lowest since February, was down 0.2% at $1.3604.

Analysts cited a stand-off between Britain and the European Union as a risk factor for sterling.

Prime Minister Boris Johnson said that his government would outline its approach on the Northern Ireland Protocol to Britain’s parliament on Wednesday.

COVID-19 cases in Britain are also surging.

The euro was up 0.3% versus the commodity-dependent Norwegian crown, with the pair changing hands at 10.6388.

The pair spiked to 10.7038 in the previous session — a seven-month low for the Norwegian crown.

“Generally, we see the recent dip in cyclical FX as a correction rather than a more pronounced trend and look for a recovery in higher beta currencies backed by hawkish central banks later this summer,” wrote ING strategists in a note to clients.

In a quiet day for economic data, currency markets are looking ahead to the European Central Bank (ECB) meeting on Thursday.

A dovish tone is expected after ECB President Christine Lagarde foreshadowed a guidance tweak during an interview last week.

The euro was down 0.2% against the dollar at 0731 GMT, at $1.17545, close to its lowest since early April.

The ECB announced a new strategy which allows the bank to tolerate inflation above its 2% target, and Lagarde said policy guidance would be revisited to demonstrate the bank’s commitment to the new goal.

In cryptocurrencies, Bitcoin rose back above $30,000, having dipped below this key level for the first time in a month on Tuesday.

At 0733 GMT, it was trading around $30,828, while ether was at $1,868

 

 

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