U.S. Dollar Rises To Three-Month High As Investors Seek Refuge
The US dollar climbed to a three-month peak on Tuesday, July 20, 2021, in a flight-to-safety bid, as investors remained anxious about a fast-spreading coronavirus variant that could throttle global growth, Gertrude Chavez-Dreyfuss and Saikat Chatterjee reported for Reuters.
Commodity currencies tied to risk appetites such as the Australian, New Zealand and Canadian dollars struggled, with investors opting for safety or staying on the sidelines in the midst of renewed fears about the highly contagious Delta variant, now the dominant coronavirus strain worldwide. The United States, for instance, has seen a surge in infections, especially in areas where vaccinations have lagged. read more
The gains in the dollar come at a time when yield differentials have moved against it. Benchmark 10-year U.S. Treasury yields dipped to a five-month low below 1.20% on Monday.
"Many believe the very best of the recovery has already passed us and what is even worse, the medical concern that seemed to be fading away, seems to be returning with a vengeance," said Juan Perez, FX strategist, and trader at Tempus Inc, in Washington.
"I believe the safe-haven strengthening is merited, considering that global progress has been anemic to what it appeared like in Q1 so now all valuations and high expectations for growth are being rightly questioned," he added.
In mid-morning trading, the dollar index, a measure of its value against six major currencies, rose 0.2% to 93.086, after hitting a three-month high of 93.161 earlier in the session. Data showing that US housing starts rose 6.3% to a seasonally adjusted annual rate of 1.643 million units last month had little reaction from the FX market.
The euro weakened 0.3% to $1.1765, after dipping to $1.1755, the lowest since early April ahead of a European Central Bank policy decision on Thursday.
The British pound was also among the biggest losers, with the currency declining 0.5% to $1.3607 as Boris Johnson's "freedom day" - ending more than a year of COVID-19 lockdown restrictions in England - was marred by surging infections. The Australian dollar dropped to its lowest since late November and was last down 0.2% at US$0.7322.