The European currencies declined on Friday. The euro fell due to the indecision among the eurozone governments about a rescue package for economies damaged by the coronavirus pandemic.
The U.S. dollar gained 0.5% against it, trading at $1.0799 on Friday. Analysts think that the euro may be declining due to rebalancing as forex reserve managers stock up on dollars. The sterling also lowered against the dollar.
Meanwhile, oil-exposed currencies rallied on Thursday briefly, but they tumbled down again due to the doubts around supply cuts. The Australian dollar, the Norwegian crown, and the Canadian dollar were among them. The New Zealand dollar dropped also.
Safe-haven currencies – the Swiss franc and the Japanese yen declined against the dollar as the greenback strengthened across the board.
What caused the U.S. dollar’s new rally?
The dollar rebounded after its recent decline and rose against the major currencies on Friday. As the economic fallout from the coronavirus pandemic is worsening, investors resumed buying dollars. As a result, the greenback was up 0.5% versus the basket of currencies.
The U.S. currency fluctuated during the last month, first hitting high and then plummeting down as the U.S. Federal Reserve flooded the forex market with liquidity. Despite that, the greenback index increased almost by 2.5% over the week.
But experts are concerned as purchasing managers’ indexes across the eurozone, as well as Britain, showed a slump in business activity on Friday. The disastrous economic impact of the epidemic is becoming more evident as lockdowns continue.
According to the analysts at Commerzbank, global recession fears are terrifying the markets without much differentiation between the countries. Which is why the U.S. dollar is standing up rather well so far.
Seema Shah, the chief strategist at Principal Global Investor, thinks that when governments lift self-isolation measures, at last, economic activity will take much longer to get back on its feet.