This Friday, the dollar is gaining ground in the forex market, setting its best week in a month.
This is due to fears of new coronavirus outbreaks, making investors wary of a rapid economic recovery. As a result, they are attracted to the safety of the world’s reserve currency: the USD.
Forex Market: Dollar Takes a Hit from Coronavirus Rebound
Forex: Dollar Index Rises
The focus of the markets is on the increase in coronavirus cases and hospitalizations in many U.S. states this week. This is of considerable national concern, as the increase in the number of daily infections after more than a month of decline reflects a lack of rapid economic recovery.
However, thanks to this preference for safe-haven assets, the USD is gaining ground this week, showing a small gain of 0.51% against a basket of currencies. This has been its best performance since mid-May.
The currency rose 0.18% near noon, reaching 97.61 points, nearing its highest level since June 2.
Forex Dollar Gains Ground 19062020
Graph of Friday’s activity, representing the increase in the dollar index. Source: Yahoo! Finance
In addition, more than 150 new cases of coronavirus have been detected in Beijing since last week, further baffling investors. They fear a return to global quarantines, as the city’s alert level has been raised. Of course, this fact is causing the dollar to rise.
Juan Perez, a senior currency trader and strategist at Tempus, Inc. has his views on this trend:
„With COVID-19 and how it relates to the economy, we know this is not going to go away and we’re going to have to learn to deal with it. Of course, with that comes a little risk in the marketplace (…) There was a belief that the economic recovery would be strong, but now there are doubts.
He added, however, that the big impact on the U.S. economy, compared to the rest of the world, would ultimately fall on the dollar. This despite its appeal as a safe haven.
Forex Market: GBP Drops Below 1.24
Euro in the Forex Market
On the other hand, contrary to the increase in the dollar, the euro weakened slightly, falling 0.12% to US$ 1,119. This occurred at the start of a European Union summit that will discuss a US$ 750 billion coronavirus recovery fund
According to diplomatic officials, the head of the European Central Bank, Christine Lagarde, told EU leaders that their economy was in a „dramatic decline“ and asked them to act to lead the recovery.
In addition, Sweden, Denmark, Austria and the Netherlands, say the proposed recovery fund is too large. They also consider that the allocation of money is not sufficiently linked to the pandemic.
And you, do you think that the increase in the dollar index will continue or will collapse? We are waiting for your opinion in the comment box.