Mon, August 15, 2022

Dollar continues gaining. What about commodity currencies?

Dollar continues gaining. What about commodity currencies?

The U.S. dollar gained on Thursday, its index rising by 0.1% to 97.27 against a basket of currencies. A new increase in coronavirus cases in the United States, along with fresh trade tensions, undermined hopes for a rapid global recovery, prompting investors to move on risk-off currencies.

In the United States, new daily virus cases surged to nearly 36,000 in the latest tally. The governors of New York, Connecticut, and New Jersey ordered travelers from nine other U.S. states to quarantine for 14 days on arrival. But coronavirus has already shown signs of surging in the southern and western parts of the country.

Bart Wakabayashi, Tokyo Branch Manager of State Street Bank and Trust, stated that the market is getting concerned that this is not just a temporary spike. If things get worse, further economic shutdowns will have severe repercussions, as the U.S. is the world’s largest economy.

Even though some investors believe that the economic impact of second-wave infections will be smaller than the first one, others fear that policymakers might fail to respond forcefully and risk further financial damage.

Shinichiro Kadota, the senior currency strategist at Barclays, noted that the risk-averse mood is supporting the greenback. FX markets originally priced in all the positive news about economic recovery. They have now seen the news about the second wave, so things may change.

What about the Euro and other currencies?

The Euro declined to $1.1246 on Thursday. The British pound also tumbled down to $1.2411. Meanwhile, commodity currencies suffered losses as well. The Australian dollar dropped down slightly to $0.6859 after lowering by 0.90% during the previous day. The Canadian dollar also plummeted down to C$1.3642 to the dollar.

The Japanese Yen tumbled down against the U.S. dollar. The greenback traded at 107.18 yen, jumping back from a 1-1/2-month low of 106.075 touched on Tuesday.

The International Monetary Fund announced that it sees a deeper and wider damage from the pandemic than first thought, causing more concerns for traders.


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