Wednesday was a hard day for a majority of currencies. The sterling fell against the U.S. dollar, lowering by 0.4% to $1.2376.
Even though the euro dropped against the dollar by 0.2% to $1.1015, it soared against most other currencies. This was due to its vast liquidity, which is attractive for traders during the economic crisis.
Investors also bought the safe-haven yen thanks to its risk-off status. The yen rose by 0.2% against the dollar to 107.33 per dollar.
The U.S. dollar, on the other hand, hit high against the riskier currencies on Wednesday until the Fed released more dollars into the system to calm markets.
The dollar’s rise against New Zealand and Australian dollars, as well as most emerging market currencies after the recent wave of sell-off in global shares, showed that investors stay in the flight mode. All in all, the greenback gained 0.3% to 99.290 against a basket of currencies.
The Fed wants to do everything necessary to ensure dollar liquidity – noted Kyle Rodda, the analyst at broker IG Markets in Melbourne. But its measures put downward pressure on the greenback.
The Federal Reserve broadened the ability of dozens of foreign central banks to access the dollar during the coronavirus crisis on Tuesday. Thus, allowing them to exchange their holdings of U.S. Treasury securities for overnight dollar loans.
What about the Asian currencies?
China seems to recover from the negative impact of coronavirus. However, Masahiko Loo, portfolio manager at Alliance Bernstein in Tokyo, stated that while the U.S. and Europe are hit by the first wave now, there could be more waves from re-imported cases in Asia.
According to him, markets have still not fully priced in the damage from the coronavirus, with some people talking about V-shaped recovery.
After the dollar’s rally, the Australian dollar fell by 0.35% to $0.6115. While the New Zealand dollar lowered by 0.3% to $0.5945.
Meanwhile, emerging market currencies were hit harder. The South African rand slid by 0.7% to 17.952 per dollar. And the Mexican peso fell more than 1% to 23.960 to the dollar. Most Asian currencies also declined.