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Dollar Gains as Growth Concerns Prompt Risk Aversion

ForexJul 09, 2021 03:01AM ET
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© Reuters.

By Peter Nurse

Investing.com - The dollar pushed higher in early European trade Friday with the safe haven benefiting from investors becoming more risk averse on concerns of the global economic recovery as Covid-19 cases surge again.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 92.505, just shy of Wednesday’s three-month high at 92.844.

USD/JPY was up 0.3% at 110.06, EUR/USD fell 0.1% to 1.1827, while the risk-sensitive AUD/USD fell 0.1% to 0.7419, adding to Thursday’s 0.7% decline and just above the fresh low for the year at 0.7410. 

Concerns have been growing that the fast-spreading delta variant of the Covid-19 virus could hamper a global economic revival that is already showing pockets of weakness.

These worries resulted in the benchmark 10-year U.S. Treasury yield falling to its lowest in nearly five months at 1.25% late Thursday, pressuring the dollar, but has since rebounded to 1.34%. It was as high as 1.54% just two weeks ago.

San Francisco Federal Reserve President Mary Daly told the Financial Times in an interview published on Friday that: “One of the biggest risks to our global growth going forward is that we prematurely declare victory on Covid."

"If the global economy . . . can’t get . . . higher rates of vaccination, really get Covid behind [us], then that’s a headwind on U.S. growth," Daly added.

Japan has already declared a state of emergency for Tokyo as cases rise, meaning that the upcoming Olympic Games will go ahead largely without spectators. Southeast Asia is now suffering record rises in deaths and cases, while infections are also rising in the likes of the U.K. and the U.S.

“New outbreaks are still one of the biggest downside risks in terms of the sustained economic recovery moving forward,” Mathias Cormann, secretary-general of the OECD, said Thursday.

Evidence of the patchy nature of the economic recovery came with the weekly U.S. unemployment data on Thursday, as the number of Americans filing new claims for unemployment benefits rose unexpectedly last week.

Additionally, GBP/USD fell 0.1% to 1.3768 after the U.K. economy grew less than expected in May, with the country’s flash GDP estimate showing an expansion of 0.8%, a slowdown from the growth of 2% the month before, which was revised down.

Elsewhere, USD/CNY fell 0.1% to 6.4881, after China’s consumer price index grew a smaller-than-expected 1.1% year-on-year in June, while contracting a bigger-than-expected 0.4% month-on-month. Meanwhile, the producer price index grew 8.8% year-on-year, remaining uncomfortably high as Beijing tries to bolster a post-coronavirus revival.

 

Dollar Gains as Growth Concerns Prompt Risk Aversion
 

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Comments (4)
Usman Gambo
Usman Gambo Jul 09, 2021 5:53AM ET
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Good morning
Usman Gambo
Usman Gambo Jul 09, 2021 5:52AM ET
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I nee 10000
CHADWICK RICHINGTON
CHADWICK RICHINGTON Jul 09, 2021 5:33AM ET
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The dollar is riskier than anything right now
Michael Dell
Michael Dell Jul 09, 2021 3:43AM ET
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Why wouldnt dollar be a safe haven ? Afterall the Fed have unlimited supply because it has the magic printer and keyboard :D :D…It has showed its power when its balance sheet was below $1 Trillion in 2008 to right now $8.1 Trillion :D :D :D
 
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