Investing.com -- EUR/USD soared more than 1% for the second consecutive session to move to its highest level in nearly two months, amid a massive sell-off in equity markets worldwide as concerns of a recession in China mounted.
The currency pair traded between a range of 1.1229 and 1.1389 before settling at 1.1384, up 0.0144 or 1.28% on Friday’s session. The euro closed higher against the dollar for the third straight session, moving to its highest versus its American counterpart since late-June. While the pair has remained in a holding pattern between 1.08 and 1.14 for the majority of 2015, it is by roughly 4% since the start of the summer.
EUR/USD likely gained support at 1.0808, the low from July 20 and was met with resistance at 1.1411, the high from June 22.
Stocks around the world have suffered a massive sell-off since Wednesday afternoon when the Federal Open Market Committee rattled markets with the release of relatively dovish minutes from its July meeting, which provided indications that persisting weakness in the economy could prompt it to delay an interest rate hike beyond September. The downturn has exacerbated fears of a global economic slowdown, as markets ranging from Wall Street and the U.K. to China entered correction on Friday following declines of more than 10% from recent highs. The Dow Jones Industrial Average plunged more than 500 points in Friday’s session, after suffering its worst one-day loss in four years.
The equities crash has sent investors to scurrying to government bonds, as yields continued to plunge. As a result, U.S. Treasuries are in line for one of their strongest months of the year amid soaring bond prices. On Friday, the yield on the U.S. 10-Year fell four basis points to an intraday low of 2.03%, its lowest level since late-April. Yields on 10-year government bonds in Germany and the U.K. also moved lower during Friday’s session.
In overnight trading, reports in China indicated that manufacturing production nationwide has shrunk at its quickest pace in more than six years, illustrating the unrelenting listlessness in the nation’s factory sector. A preliminary reading of the Flash China Caixin PMI for August fell to 47.1, its lowest level since the end of the Financial Crisis. A reading below 50 provides a signal of contraction in the industry. The reading fell considerably below analysts’ forecasts of 47.7 and extended losses from July’s reading of 47.8, when it plummeted to a two-year low.
The People’s Bank of China (PBOC) has approved a wide range of stimulus initiatives throughout the year in an effort to drive an economy that is experiencing its slowest level of growth in more than a decade. Over the last several months, the Chinese government has lowered its benchmark interest rate twice, cut the Reserve Ratio Requirement (RRR) or amount banks must hold in cash reserves and relaxed rules on margin financing or stock trading with borrowed funds in attempts to spur activity. The PBOC also devalued the yuan by nearly 2% earlier this month in a move aimed at boosting slumping export levels.
Also on Friday, U.S. crude futures fell below $40 for the first time in six years dropping under a key technical level. The decline in oil prices has weighed on energy companies worldwide, as Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) have seen their shares fall by more than 20% over the last year.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, plummeted by nearly 1% to 94.84, its lowest level since late-June.