The U.S. currency rose in early European trade on Friday with the dollar benefiting from investors becoming more risk-averse on concerns of the global economic recovery as Covid-19 cases surge again.
At 02:55 AM ET, the dollar index, which tracks the greenback against six main currencies, traded 0.1% higher at 92.505. It was close to Wednesday’s three-month high when the index reached 92.844.
The GBP/USD declined 0.1% to 1.3768 after the U.K.’s economy grew less than expected in May.
The USD/CNY dropped 0.1% to 6.4881 after China’s consumer price index rose a smaller-than-expected 1.1% year-on-year in June while contracting a bigger-than-expected 0.4% month-on-month. In the meantime, the producer price index rose 8.8% year-on-year, remaining uncomfortably high as China tries to boost a post-coronavirus revival.
The USD/JPY gained 0.3% to 110.06. Japan is trying to cope with the Covid-19. The country declared a state of emergency in the capital city of Tokyo. Hence, the upcoming Olympic Games will go ahead largely without spectators. The state of emergency is set to go into effect from next week. There is huge pressure to limit the spread of Covid-19 at the games, protecting both athletes and neighboring regions. More than 11,000 athletes from all over the world will travel to Japan along with thousands of officials and staff. Southeast Asia is now suffering a record rise in deaths and cases, while infections are also rising in the likes of the U.K. as well as the U.S.
Dollar and Covid-19 pandemic
The EUR/USD dropped 0.1% to 1.1827, while the risk-sensitive Australian dollar also suffered losses. The AUD/USD fell 0.1% to 0.7419 adding to Thursday’s devaluation and just above the fresh low for the year at 0.7410.
Concerns have been growing for some time as the fast-spreading delta variant of the Covid-19 could affect the global economy. Those worries resulted in the benchmark 10-year U.S. Treasury yield declining to its lowest point in nearly five months on Thursday. Its decline affected the U.S. dollar, but since rebounded to 1.34%. It was as high as 1.54% last month, more precisely just two weeks ago.
The weekly U.S. unemployment data showed that the state of the world’s largest economy is not ideal. The number of people filing new claims for unemployment benefits rose suddenly last week. It is another indication that the labor market recovery from the pandemic continues to be choppy.