The euro tumbled down by 0.5% versus the dollar on Monday, lowering to $1.1776 at one point. The Sterling slid by 0.5% as well, trading at $1.2849.
However, the U.S. dollar soared in London trade as U.S. stock futures declined, and European stocks collapsed to two-week lows. The dollar index surged forward by 0.3% at 93.267 against a basket of currencies.
Traders are looking out for Federal Reserve’s statements, hoping that the agency may shed light on the U.S. central bank’s new inflation approach.
In Asia, the Chinese yuan traded just below a 16-month high. It jumped by almost 6.5% in four months. The Japanese yen also hit a six-month high versus the U.S. dollar on Monday.
What caused the Yen’s rally?
Stock markets ended in the red on Monday, causing concerned investors to turn to the Japanese currency as a safe-haven. Wall Street closed lower on Friday. Additionally, European and Asian stock markets traded on the bearish territory on Monday. The threat of new lockdowns amidst surging coronavirus cases made traders anxious about the global recovery.
An unrelenting rise in Covid-19 cases weighs on sentiment at the start of the trading week. Investors increasingly question their rosy predictions about the global recovery – stated Raffi Boyadjian, the senior investment analyst at online broker XM. The resulting selloff was similar to what happened in March, with banks and travel shares pushing the stocks lower.
However, the greenback gained broadly, while the euro dropped, along with government bond yields. The safe-haven Yen hit 104.065 against the dollar in the early trading on Monday. That was its highest level since March 12.
Marshall Gittler, the head of research at BDSwiss, stated that the Yen’s surge was part of a typical risk-off move in markets except for the Swiss franc, which turned weaker. In its past six sessions, the Japanese currency has already soared by 2% against the dollar.