By Peter Nurse
Investing.com - The U.S. dollar is back in demand Wednesday, as investors sought safe havens amid disappointing news surrounding the coronavirus outbreak and the economic damage in Europe becomes apparent.
At 3 AM ET (0700 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, stood at 100.345, up 0.4%, while EUR/USD fell 0.3% to 1.0857 and GBP/USD dropped 0.3% to 1.2300. USD/JPY climbed 0.1% to 108.81.
The U.S. recorded its highest single-day increase in virus deaths on Tuesday, with some 1,800 deaths. Governor Andrew Cuomo said that deaths in New York state also rose.
This came as a disappointment as the state had previously seen two days of slowing infection rates and fewer deaths.
“Risk aversion and the U.S. dollar are going hand in hand,” Ray Attrill, head of FX strategy at National Australia Bank, told CNBC.
“Improvement has been based on less-bad statistics coming out of various parts of the world...but our view is that markets are going to remain choppy - we can’t expect an uninterrupted flow of singularly good or singularly bad news,” he added.
The euro is weakening as Eurozone finance ministers struggle to reach an agreement on how to assist ailing member states hit by the coronavirus.
The sticking point appears to be the issuance of common debt instruments to finance the coronavirus-related spending, commonly known as ‘coronabonds’, which France, Italy and Spain in particular are pushing for, while Germany, the Netherlands, Austria and Finland are against.
However, the need for aid is becoming more apparent with every passing day.
The Bank of France estimated Wednesday that the country’s economy contracted 6% in the first quarter due to the lockdown measures put in place to combat the coronavirus outbreak. That would be the biggest contraction on a quarterly basis since World War II.
And these measures don’t look like ending anytime soon, with the Italian press reporting that Italy may not reopen schools before September.