By Yasin Ebrahim
Investing.com – The dollar rode a slump in the euro to a more than one-month high on Monday, and appeared to reclaim its safe-haven status amid jitters over global growth amid rising odds of Europe re-imposing lockdown measures to curb the spread of Covid-19.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.80% to 93.69, its highest since Aug. 13.
“Expect lots more restrictions over the days and weeks ahead, especially in Europe," Deutsche Bank (DE:DBKGn) analysts said in a note Monday. "The fact that the virus is already spreading quite rapidly is a big worry."
European health ministers have raised the alarm bells on the impact of a second wave, with German Health Minister Jens Spahn reportedly warning Monday that Germany could see infection spikes following a spread in countries such as France, Austria, and the Netherlands.
In the UK, Patrick Vallance, Britain’s chief scientific adviser, said that there could be 50,000 new infections every day by mid-October if the virus continues at its current rate.
EUR/USD fell 0.66% to $1.1759 and GBP/USD fell 0.89% to $1.2801.
Still, the rally in the dollar could prove to be short-lived as Federal Reserve Chair Jerome Powell is likely to reiterate the bank's lower-for-longer interest rate environment in congressional testimony this week later this week, ING said in a note.
"That should keep the dollar on the back foot, even if data from Europe underwhelms," the bank added. "At the same time, it should leave the USD unable to stage long-lived rebounds and we expect the benign dollar bear trend to take shape again this week."