U.S. Dollar Rallied Against the Basket of Currencies

The U.S. dollar skyrocketed against the riskier currencies on Wednesday as the countries stay in lockdown while coronavirus pandemic continues.

The greenback rose against the sterling, New Zealand, and Australian dollars, and most emerging market currencies after the recent wave of sell-off in global shares showed that investors stay in the flight mode.

Masahiko Loo, portfolio manager at Alliance Bernstein in Tokyo, stated that markets have still not fully priced in the damage from the coronavirus. According to him, while the U.S. and Europe are hit by the first wave now, there could be more waves from re-imported cases in Asia.

The Australian dollar fell by 0.35% to $0.6115, while the New Zealand dollar lowered by 0.3% to $0.5945. The British pound also dropped by 0.4% to $1.2376.

What About the Euro and Safe-Haven Yen?

The euro eased 0.2% to $1.1015, but it sill rose against most other currencies as its vast liquidity is attractive for traders during the economic crisis.

Investors also sought out the safe-haven yen, which increased by 0.2% against the dollar to 107.33 per dollar.

Emerging market currencies, on the other hand, were hit harder. The Mexican peso fell more than 1% to 23.960 to the dollar. While the South African rand slid by 0.7% to 17.952 per dollar. Most Asian currencies also declined.

The dollar, however, gained 0.3% to 99.290 against a basket of currencies. The U.S. currency soared versus most majors until the Fed released more dollars into the system to calm markets.

The Federal Reserve broadened the ability of dozens of foreign central banks to access the greenback during the coronavirus crisis on Tuesday. It allowed the banks to exchange their holdings of U.S. Treasury securities for overnight dollar loans.

Kyle Rodda, the analyst at broker IG Markets in Melbourne, noted that the Fed wants to do everything necessary to ensure dollar liquidity. Still, its measures put downward pressure on the currency.