Dollar hits new 9-1/2 month high as FX traders seek safety

The dollar was steady on Tuesday, holding near the previous session’s five-day low, as markets appeared less concerned by the spread of the delta variant, while the New Zealand dollar picked up after hawkish comments from the central bank.

Risk appetite in global markets was up, after the U.S. Food and Drug Administration granted full approval to the Covid-19 vaccine developed by Pfizer and BioNTech, a move that could accelerate inoculations in the United States.

Rising Covid-19 infections caused by the highly contagious Delta variant have fueled concerns about the recovery from the global health crisis. But markets have largely looked past this so far this week, with analysts citing thin liquidity as a factor driving apparent swings in risk appetite.

At 7:12 a.m. ET, the dollar was flat on the day at 92.97 versus a basket of currencies. It hit a five-day low of 92.947 on Monday and had its largest one-day drop since May.

Versus the yen, the dollar was unchanged with the pair changing hands 109.67 yen per dollar.

The euro was flat against the dollar, at $1.1742.

Market attention is focused on the Jackson Hole conference on Friday, at which some investors expect the U.S. Federal Reserve Chair Jerome Powell to give hints about the possible timeline for tapering monetary stimulus.

“The uncertainty over the spread of the Delta variant and how local authorities will respond has certainly created a sense of ‘short-termism’ in FX markets,” wrote ING strategists in a note to clients.

“We think investors will want to wait to hear on this subject from Jerome Powell on Friday before pushing ahead with another major round of risk-buying, dollar-selling.”

Covid-19 case counts are also being closely watched, especially in China where outbreaks appear to be coming under control and in New Zealand where monetary policy was put on hold last week while the country locks down to contain the Delta variant.

French health authorities said the number of people hospitalized for COVID-19 and those treated in intensive care units stood at the highest levels in more than two months.

Data on Monday showed business activity growth in the United States slowed for a third straight month.

But the Australian dollar – seen as a liquid proxy for risk appetite – was up 0.5% at $0.7247.

The New Zealand dollar was up 0.8% at a 6-day high of $0.6947, boosted by the Reserve Bank of New Zealand’s assistant governor, Christian Hawkesby, saying that policymakers had actively considered a 50 basis point rate hike at the meeting last week.

The RBNZ left rates on hold at a record-low 0.25% last week, but flagged tightening before the year’s end.

A senior central bank official said on Monday the new outbreak of the coronavirus in New Zealand is not a “game changer” yet and there is no pressure to act on monetary policy.

Firmer commodity prices had also helped the Australian and New Zealand dollars earlier in the session.

The Canadian dollar was down 0.3% against the U.S. dollar.

Elsewhere, bitcoin – which rose above $50,000 for the first time since May on Monday – edged back below this key level. At 7:14 a.m. ET, it was down 0.2% on the day at $49,152.28.

Leave a Reply

Your email address will not be published. Required fields are marked *