The U.S. dollar plummeted down on Friday, getting on course for its biggest monthly drop in a decade. Traders fretted that a rebound in the U.S. economy would be hindered by the struggle to stem the Covid-19 epidemic.
However, the greenback’s weakness propelled the euro higher. The common currency reached $1.19, its strongest since May 2018. On Thursday, U.S. President Donald Trump raised the possibility of delaying the November presidential election, further undermining confidence in the dollar.
As a result, the dollar index collapsed to as low as 92.546 in early trading on Friday. But it managed to recover to trade flat at 92.847. Overall, the greenback has fallen by almost 5% in July. Most of the drop came in the last ten days, as new coronavirus cases rose across several U.S. states. In addition, some recent data pointed to an economic rebound losing steam.
Unicredit analysts expect the dollar’s weakness will persist in August, a month in which the abrupt moves in intraday activity are more likely due to lighter market conditions.
However, they noted that, given global economic growth worries and concerns about further coronavirus developments, along with the depreciation that the U.S. dollar has already suffered in recent weeks, downward pressure may be less intense over the next month.
How did other currencies fare?
On Friday, the euro rallied to $1.1908 before settling at $1.1854, higher by 0.1% on the day. The common currency traded below $1.10 in May, but, after European Union leaders agreed to a 750 billion euro economic recovery fund this month, many traders have warmed to the currency again.
The Japanese yen hit a 4-1/2 month high against the U.S. currency. The dollar traded at 104.195 yen, and last stood at 104.64, losing 3.3% this month.
Meanwhile, the British pound jumped to $1.3143, a 4-1/2 month high. It was a little stronger against the euro, at 90.33 pence.
The Swiss franc also extended its rally against the greenback. The U.S. currency lowered by another 0.1%, to 0.9077 francs.
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