US Dollar, Safe Haven Currencies Gain Amid Risk-off Sentiment
Arslan Butt • 1 min read
The resurgence of the risk-off sentiment in global financial markets has once again strengthened safe haven currencies, including the Japanese yen, Swiss franc and the US dollar early on Friday. At the time of writing, the US dollar index DXY is trading around 96.83.
Stock markets around the world tumbled lower during the previous session over worries about a possible second wave of coronavirus cases even as economies attempt to reopen and start recovering. Doubts about economic recovery reigned in markets all over again after the Fed’s latest policy meeting where the central back highlighted that the US economy could remain under strain for a longer period of time than previously anticipated.
Even as the Fed turned more dovish, committing to keeping its monetary policy loose well into the next year, the US dollar gained as a safe haven currency and ended up rising higher against other riskier currencies. While some analysts have cautioned against the stock market’s optimistic rally recently, some feel that Thursday’s fall was due to correction in an overbought market and not necessarily in response to the Fed’s dovish statements.
Meanwhile, the US dollar has also strengthened in the wake of an increase in the number of coronavirus cases across the US and the rest of the world. As countries restart economic activity, a surge in cases point to a possible second wave of coronavirus infections, and raise fears of more lockdowns which could impede economic recovery globally.
The euro, GBP and the AUD have all weakened against the Greenback over the previous session amid the heightened risk-off mood in markets. The US dollar has also gained amid heightened tensions between the US and China, which continue to dominate the market sentiment with no resolution so far.