US Dollar Makes Gains as Safe Haven Currency Amid Second Wave Worries

US Dollar Makes Gains as Safe Haven Currency Amid Second Wave Worries

Posted Thursday, June 25, 2020 by
Arslan Butt • 1 min read

The safe haven appeal of the US dollar is back in focus and giving strength to the currency amid a rise in the number of new coronavirus cases across the US, underpinning hopes for rapid economic recovery even after lockdown measures are lifted. At the time of writing, the US dollar index DXY is trading around 97.31.

Worries about a possible second wave have brought back a risk-off sentiment among traders, sending riskier currencies like the Euro and GBP lower against the US dollar for now. Weakness in crude oil prices, meanwhile, have caused commodity currencies to also weaken against the greenback.

The recent spike in cases has prompted US states of New York, New Jersey and Connecticut to enforce 14-day quarantine for travelers from nine other states entering these regions. The initial optimism about economic activity resuming is giving way to fears about a resurgence in cases and a possible repeat of lockdown measures to combat the next spread of infections, which could set back economic recovery all over again.

The risk appetite in global markets was further impacted by emerging reports that the US government is looking at modifying tariffs on European imports in reaction to the aircraft subsidies issue. Furthermore, the IMF has also slashed its global economic output forecasts for this year, now expecting the global evining to contract by 4.9% as a result of the coronavirus crisis.

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