The U.S. dollar rebounded later on Wednesday due to the growing concerns that the damage to the global economy from the pandemic will be longer than anticipated. As a result, the safe-haven greenback strengthened.
The dollar recovered from early lows hit in Asian trading. It climbed up 0.5% at 99.40 against a basket of other currencies. However, it traded low during the last four days as investors were hopeful that the pandemic was slowing.
It seems, traders lost their cautious optimism after analysts warned that it’s unclear whether economies will recover quickly or whether it takes longer.
The U.S. currency gained against currencies seen as riskier bets. It rose by 1% versus the sterling. The dollar also increased by 0.5% against the euro and Swiss franc. It also climbed up by 0.2% against the Japanese yen.
However, FX and EM analyst at Commerzbank, Antje Praefcke, stated that the investors are trying to prepare for negative economic data. According to him, the worst might be yet to come, facing the market with a challenge. In that case, risk aversion would rise, allowing the dollar to hit high again.
Analysts expect that the new data from the U.S. will show a sharp fall in retail sales, as well as hits to manufacturing and industrial production. This will be the first economic data outside the U.S. jobless claims.
Kenneth Broux, the FX strategist at Societe Generale, noted that the investors are waiting for some big U.S. numbers to find out about damage.
What about the riskier currencies?
The oil prices dropped down during the last days. The investors expected that production cuts by OPEC wouldn’t support crude during a global demand crunch. As a result, riskier currencies weakened also. The oil-exposed Norwegian crown and the Canadian dollar fell sharply.
The Norwegian crown tumbled down by almost 2% against the U.S. dollar due to the oil price concerns. While the Canadian dollar declined by nearly 1% versus the greenback.