US Markets

Dollar clings to 8-week highs on recovery worries amid COVID resurgence

Credit: REUTERS/Dado Ruvic

The dollar expanded on its eight-week high on Wednesday as U.S. equities fell and investors worried about the pace of the global economic recovery as rising coronavirus infections in Europe brought restrictions and European economic data was weak.

By Sinéad Carew

NEW YORK, Sept 23 (Reuters) - The dollar expanded on its eight-week high on Wednesday as U.S. equities fell and investors worried about the pace of the global economic recovery as rising coronavirus infections in Europe brought restrictions and European economic data was weak.

Euro zone business growth ground to a halt in September, raising fears that fresh restrictions to quell a resurgence in coronavirus infections might put the economic recovery into jeopardy.

In Britain, the economy also lost momentum, a business survey showed, as consumer-facing sectors suffered, notably from the end of a government subsidy to support restaurants.

"The market continues to re-evaluate its previously very optimistic stance on the status of global risks out there," said Ben Randol, senior FX strategist at Bofa Securities in New York.

"The newsflow has been negative on the virus and negative on growth. We've had some crummy data and also we've had the Fed speakers that have been on balance considerably less dovish than the market seemed to expect which puts positions at risk."

Randol also cited comments from the Federal Reserve that had a less dovish tone than the market had expected.

Chicago Federal Reserve President Charles Evans sent investors to the safety of the dollar on Tuesday by floating the idea of rate hikes.

Then Fed Vice Chair Richard Clarida said on Wednesday policymakers "are not even going to begin thinking" about raising interest rates until inflation hits 2%.

Randol said Clarida's comment "suggests that the Fed still reserves the right to pre-emptively lift rates if it thinks that inflation will be a problem."

The dollar index =USD, which measures the dollar against a basket of six major currencies, was up 0.25% at 94.214 after earlier hitting 94.255, its highest level in two months.

The euro was last down 0.25% at $1.1677 fell to a two-month low of $1.16715 EUR=D3 in early morning trading, its lowest since July 27.

Traders in the pound and the euro were also worried that Britain and the European Union will fail to agree a free trade deal, which would cause additional economic strain.

While the pound GBP=D3 regained some ground as the session wore on to last trade at Tuesday's closing level of $1.2731, it fell earlier to $1.2676, its lowest since late July.

It came under pressure after British Prime Minister Boris Johnson introduced on Tuesday new restrictions to combat a second wave of the coronavirus.

The Australian dollar AUD=D3 was last down 1.13% at US$0.7093, after hitting a seven-week low of $0.70920. The New Zealand dollar NZD=D3 dropped 0.95% to $0.6571.

========================================================

Currency bid prices at 10:14AM (1414 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=

$1.1677

$1.1706

-0.25%

+4.17%

+1.1718

+1.1673

Dollar/Yen

JPY=

105.2000

104.9100

+0.28%

-3.36%

+105.2300

+104.9100

Euro/Yen

EURJPY=

122.83

122.83

+0.00%

+0.72%

+123.0400

+122.6000

Dollar/Swiss

CHF=

0.9228

0.9192

+0.39%

-4.65%

+0.9230

+0.9190

Sterling/Dollar

GBP=

1.2731

1.2731

+0.00%

-3.98%

+1.2759

+1.2677

Dollar/Canadian

CAD=

1.3358

1.3301

+0.43%

+2.86%

+1.3362

+1.3294

Australian/Dollar

AUD=

0.7093

0.7174

-1.13%

+1.03%

+0.7177

+0.7095

Euro/Swiss

EURCHF=

1.0778

1.0767

+0.10%

-0.68%

+1.0778

+1.0754

Euro/Sterling

EURGBP=

0.9170

0.9193

-0.25%

+8.47%

+0.9218

+0.9163

NZ Dollar/Dollar

NZD=

0.6571

0.6634

-0.95%

-2.45%

+0.6647

+0.6573

Dollar/Norway

NOK=

9.4146

9.3393

+0.81%

+7.25%

+9.4176

+9.3338

Euro/Norway

EURNOK=

10.9960

10.9480

+0.44%

+11.78%

+11.0002

+10.9260

Dollar/Sweden

SEK=

8.9543

8.9076

+0.25%

-4.21%

+8.9578

+8.9086

Euro/Sweden

EURSEK=

10.4567

10.4305

+0.25%

-0.12%

+10.4600

+10.4307

(Additional reporting by Julien Ponthus in London)

((sinead.carew@thomsonreuters.com; +1 (646) 223 6186; Reuters Messaging: sinead.carew.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Markets Videos

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More