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US Dollar Gains Due to Risk-off Sentiment

US Dollar Gains Due to Risk-off Sentiment

Posted Tuesday, October 27, 2020 by
Arslan Butt • 1 min read

The US dollar is trading slightly bullish early on Tuesday as concerns about the resurgence in coronavirus cases and its possible economic impact support the safe haven appeal of the currency. At the time of writing, the US dollar index DXY is trading around 92.92.

Leading economies of the world are seeing a sudden spike in the number of infections and hospitalizations with the onset of winter. This has raised fears among investors that governments could bring back lockdowns and restrictions again, which would take a greater toll on the economy.

With equity markets sliding down as a result of the risk-off sentiment, the US dollar has strengthened as traders rush towards its safety and away from riskier instruments. Other currencies like the Euro and the Canadian dollar have also weakened, lending support to the greenback.

The US dollar is also in favor due to the cautious mood among traders ahead of the presidential elections next week and the absence of the next round of stimulus measures. The reserve currency is expected to weaken next week if Biden comes to power as it could mean the announcement of a larger stimulus package to prop up the US economy.

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