US Dollar Strengthens Over Prevailing Risk Aversion in Markets
Arslan Butt • 1 min read
The US dollar continues to make gains against leading currencies even as stock markets around the world continue to fall over mounting worries about the economic damage the coronavirus pandemic is likely to cause. At the time of writing, the US dollar index DXY is trading at around 102.22.
Against the Pound, the US dollar has strengthened to its highest level seen since 1985 while against the euro, it has surged to a near three-year high. Commodity currencies like the AUD and NZD have weakened even further, falling to an 11-year and 17-year low against the Greenback respectively lately.
With stock markets under pressure, investors worry about an upcoming recession in the global economy and are turning towards the dollar for higher liquidity due to the increased uncertainty. Several countries are imposing tighter lockdown measures even as their governments roll out stimulus to protect their economies, but the efforts seem inadequate in the face of the mounting coronavirus crisis.
The heightened risk aversion in the markets has caused a weakness not only in riskier instruments but also safe haven assets and currencies of emerging markets. The dollar is likely to remain in favor as the pandemic continues to dominate the market sentiment and keep investors wary about making too many moves.