The dollar has surged to a two-year high as a result of growth concerns and rate bets.
The dollar soared to a two-year high on Tuesday, while the euro fell to its lowest level since March 2020, as investors worried about the economic impact of China’s COVID-19 lockdowns and rising expectations for a major U.S. interest rate hike next week boosted the greenback.
Investors have been buying dollars as markets face numerous risks, including central banks tightening policy, and as economic growth momentum slows.
The dollar index, which compares the US currency to a basket of competitors, is on track for its biggest monthly gain since January 2015.
On Tuesday, it increased by 0.2 % to 101.96. (DXY).
The euro fell 0.3 % to $1.0673 (EUR=EBS), its lowest level since March 2020, when market participants were concerned about the spread of COVID-19.
The euro has been harmed not only by the economic impact of the Ukraine war, but also by expectations that the European Central Bank will raise interest rates more slowly than the Federal Reserve. The Fed meets next week, and markets are pricing in a 50 basis point hike then, as well as another in June.
“The global growth-inflation backdrop remains tenuous and supportive of dollar strength,” JPMorgan analysts wrote in a research note, citing recent growth downgrades and inflation forecast upgrades and stating that the dollar/yen rate remains their preferred way to play rising US interest rates.
JPMorgan analysts also reduced their euro/dollar forecast for the third quarter to $1.05 from $1.11 previously.
JITTERS IN YUAN
For about a month, China’s financial hub of Shanghai has been under strict lockdown to combat COVID, while Beijing overnight ramped up plans for mass-testing of 20 million people, fueling fears of a looming lockdown.
In European trading, China’s offshore yuan (CNH=EBS) was slightly stronger at 6.5686 per dollar, but still off the 17-month low of 6.61 hit on Monday.
The yuan began to recover after the People’s Bank of China calmed market fears late Monday by announcing a reduction in the amount of foreign currency banks must hold as reserves.
The British pound (GBP=D3) dipped 0.2% to $1.2706, having hit $1.2697 late Monday, its lowest since September 2020.
The Australian dollar (AUD=D3) climbed 0.4% to $0.7212, pushing it further away from two-month lows reached overnight after China lockdowns weighed on commodity prices.
The dollar fell 0.2% against the Japanese yen <JPY= EBS>, to 127.82. The yen has managed a small recovery from last week’s 20-year low of 129.43.
Tuesday’s economic data is light, but investors will be looking for U.S. consumer confidence figures.
Bitcoin (BTCUSD) was little changed, trading around $40,495, while ether (ETH=BTSP) fell slightly to just under $3,000.
GBP/USD is also seeing another down day, falling 0.4% to 1.2685 as sellers continue to keep the pressure towards the September 2020 low of 1.2675
The aussie and the kiwi are among the better performers with AUD/USD up 0.3% to 0.7200 and NZD/USD up 0.2% to 0.6630 but the gains aren’t amounting to much as compared to the drop in recent days.
Markets News :
- JPY leads, GBP lags on the day
- European equities higher; S&P 500 futures up 0.57%
- US 10-year yields down 4.9 bps to 2.775%
- Gold up 0.22% to $1,902.12
- WTI up 1.2% to $99.79
- Bitcoin up 0.15% to $40,495