The U.S. dollar skyrocketed on Friday due to rising geopolitical tensions. This was compounded by fears that the second wave of coronavirus cases could hinder a swift economic recovery. The greenback is on track for its best weekly gain in a month.
While it was flat in European morning trade, overall, the dollar has gained about 0.3% this week against a basket of currencies.
The Forex Markets’ main focus was on the surge in virus cases in many U.S. states this week. New infections were detected in Beijing as well, increasing traders’ concerns of a return to global lockdowns.
Commerzbank analysts stated that even if there won’t be a “second wave,” a renewed rise in infection numbers shows that things are not going to return to normal for a long time.
Meanwhile, tensions remain high between India and China, even though the two Asian nuclear powers agreed to try de-escalating their confrontation in the western Himalayas. U.S. President Donald Trump also renewed his threat to cut ties with China, further distressing analysts.
What about the Australian dollar?
The Australian dollar gained 0.3%, trading at $0.6875 on Friday. The currency has soared by almost 25% from March lows.
However, Australian Prime Minister Scott Morrison stated that a “sophisticated state-based actor” has been trying to hack a wide range of Australian organizations for months. That caused even more turmoil in markets.
On Friday, the euro was flat, at $1.1207. It has lost about 1% versus the dollar since Tuesday. Traders are looking out for a European Union summit at which bloc leaders will attempt to navigate regional divisions over a 750 billion euro coronavirus recovery fund.
The British pound also traded flat at $1.2433. New data showed that British retail sales rebounded more strongly than expected last month. However, public borrowing hit a record high as debt surpassed economic output.
Amelie de Montchalin, French Junior European Affairs Minister, stated on Friday that she could not rule out Brexit talks ending without a deal. But it remains in Britain’s interests to reach an agreement.