US Dollar Rallied Wednesday as Risk-Aversion Continues
The United States (US) dollar rallied Wednesday afternoon on further support from risk-aversion, lifting the dollar index or DXY to four-month highs of 93.26 after falling to 93.00 overnight.
Concerns about rising COVID-19 cases more than offset weak home building data earlier in the day. The dollar moved back slightly after the minutes of the July 27-28 meeting showed some progress toward tapering, but not enough to discuss exactly when to start.
However, the minutes show that it could begin as early as later this year if conditions advance as expected and the delta variant of the coronavirus is contained.
Thursday’s US schedule includes weekly jobless claims, the Philadelphia Fed’s regional manufacturing index for August and weekly data on natural gas stocks.
A quick summary of foreign exchange action on Wednesday indicates that EUR-USD has bottomed at 1.1694, the lowest since November, as the dollar was lifted by safe-haven flows. The US economic outlook remains brighter than its peers, which should continue to prop up the dollar.
GBP-USD improved from its three-week low reached on Tuesday, but still took a hit after UK inflation came in weaker-than-expected and give the Bank of England more room to wait before tightening policy.
USD-JPY hit a four-session high of 109.95, up from overnight lows of 109.55 and 109.72 earlier on Wednesday. As with other currency pairs, safe-haven flows have benefitted the dollar, even against the Japanese Yen due to rising COVID cases in Asia.
USD-CAD recovered to over 1.2610 after dipping to near 1.2598 after the Canada consumer inflation data came in stronger-than-expected. Meanwhile, oil prices held steady near the bottom of their range, limiting the upside for the Canadian dollar.
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US Dollar Rallied Wednesday as Risk-Aversion Continues
