Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Dollar Soars to Two-Decade High; Safe Haven Demand on Global Growth Fears

Forex May 09, 2022 02:52AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters

By Peter Nurse

Investing.com - The U.S. dollar soared to a two-decade high in early European trade Monday, with traders seeking out this safe haven amid concerns about global economic growth as well as searching for yield. 

At 2:50 AM ET (0650 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, gained 0.5% to 104.170, rising to levels not seen in 20 years after rising for a fifth week in a row last week.

The war in Ukraine and tighter lockdowns against COVID-19 in Beijing and Shanghai have created uncertainty over economic growth in Europe and Asia.

This week sees the release of Germany's ZEW sentiment index and preliminary first quarter GDP data from the U.K., and these are likely to point to slowing growth in two of Europe’s largest economies.

Data earlier Monday from China showed the country's export growth slowed to single digits in April, growing 3.9% in April from a year earlier, compared with the 14.7% growth reported in March. The growth was the slowest since June 2020.

By contrast, data released on Friday showed that U.S. nonfarm payrolls increased 428,000 in April, more than expected. This suggests the demand for labor remains strong, with businesses scrambling to hire enough workers to keep up with resilient consumer demand.

EUR/USD fell 0.4% to 1.0509, marginally above its recent low of 1.0469, USD/JPY rose 0.4% to 131.12, at a two-decade high, while GBP/USD fell 0.5% to 1.2277, at a new 22-month low, despite the Bank of England’s decision to lift interest rates on Thursday for the fourth meeting in a row.

“One of the big differences between the Fed and the BoE is that U.S. inflation is more domestically generated from tight labor markets and the huge fiscal stimulus seen over recent years,” said analysts at ING, in a note.

The U.S. Federal Reserve last week announced a 50 basis point hike, its largest increase since 2000, and the yield on benchmark 10-year U.S. government bonds has continued to climb ahead of Wednesday’s inflation figures on fears of an upside surprise.

Futures markets are pricing a 75% chance of a 75 bp rate rise at the Fed's next meeting in June and more than 200 bps of tightening by year's end.

Policy members at the European Central Bank have also started talking more openly about hiking rates, with Austrian central bank governor Robert Holzmann, a known hawk, stating in a newspaper interview over the weekend that the central bank should raise interest rates as many as three times this year to combat inflation.

However, “given that around 90bp of ECB tightening is already priced by year-end, we do not think a further round of ECB hawkish talk is enough to provide much support to EUR/USD,” added ING.

“Instead, the Fed story and weak growth in Europe and China are likely to see EUR/USD trading on the soft side of a 1.0500-1.0650 range, with risks skewed towards a break down to the 2016 lows of 1.0350.”

Elsewhere, USD/CNY rose 0.8% to 6.7200, at a fresh 18-month low after the country’s trade data and with Covid-19 lockdowns remaining in place, while AUD/USD fell 1.1% to 0.7000, just off January’s low.

 

 
 
Dollar Soars to Two-Decade High; Safe Haven Demand on Global Growth Fears
 

Related Articles

Dollar Edges Higher, Lifted by Safe Haven Demand
Dollar Edges Higher, Lifted by Safe Haven Demand By Investing.com - Jul 01, 2022 3

By Peter Nurse Investing.com - The U.S. dollar edged higher in early European trade Friday, trading close to the highs of the year on safe-haven demand as central banks take on...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Elezabeth Thomas
Elezabeth Thomas May 10, 2022 6:30AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Such a LIE!
Sol Wein
Sol Wein May 09, 2022 5:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Use that strength to get out of dollars and buy inflation hedges that are on sale right now. This dollar rally will not last
Kristof Naessens
Kristof Naessens May 09, 2022 3:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Dollar is only compared to other toilet paper currencies, a currency backed by nothing can never be a safe haven, as we speak, commodities are more and more beging settled in other currencies than the dollar. There are less and less free trading markets, everything is getting managed to create the illusion of a strong market/currency.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email