Dollar rises on concerns over global economic recovery

by Jonathan Adams
global economic recovery

The U.S. Dollar Index rose 0.05% to 92.453; however, the greenback retreated from a three-month high

The dollar was higher on Friday morning in Asia amid concerns over the global economic recovery as Covid-19 cases continue to surge. Safe-haven currencies such as the Japanese yen and Swiss franc also rose, while riskier currencies such as the Australian and New Zealand dollars remained near multi-month lows.

The U.S. Dollar Index rose 0.05% to 92.453 by 3:47 AM GMT. However, the greenback retreated from a three-month high.

The USD/JPY pair gained 0.15% to 109.95, with the yen holding onto gains from the previous session’s 0.8% rally. However, Japan has declared a fresh state of emergency in Tokyo as COVID-19 case numbers continue to rise.

The AUD/USD pair shed 0.11% to 0.7420 with the Australian dollar continuing its losses after falling 0.7% and hitting its weakest since mid-December 2021 on Thursday. The current lockdown in Sydney could be extended as the city struggles to contain its latest outbreak.

In New Zealand, the NZD/USD pair fell 0.19% to 0.6940.

The USD/CNY pair declined 0.09% to 6.4840. Chinese data, released earlier in the day, said the consumer price index (CPI) grew a smaller-than-expected 1.1% year-on-year (YOY) in June, while contracting a bigger-than-expected 0.4% month-on-month. Meanwhile, the producer price index (PPI) grew 8.8% year-on-year.

The GBP/USD pair dropped 0.07% to 1.3775.

The Swiss franc held on to its gains from the previous session, when it soared more than 1%, on Friday.

Bonds rallied while global stocks tumbled as worries about economic recovery mounted amid the outbreaks involving the Delta variant of Covid-19. The benchmark U.S. Treasury yield dropped to a nearly five-month low of 1.25% during the previous session, from the 1.5440%-high hit two weeks ago.

This has pressured the greenback.

There is certainly a wind of change in markets, as concerns about inflation now shift to concerns about growth, National Australia Bank strategist Rodrigo Catril said in a note.

There has not been a single catalyst triggering a turn in sentiment, instead it seems that an accumulation of events, including the rapid spread of the Delta variant and fears that central banks could begin asset tapering earlier than expected and delay the economic recovery from COVID-19, the note added.



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