US Dollar’s Safe Haven Appeal Weakens as Risk Appetite Improves

The US dollar is trading bearish in early trading on Friday, driven lower as the market sentiment improves on the back of better than

Arslan Butt•Friday, January 29, 2021•1 min read

US Dollar's Safe Haven Appeal Weakens as Risk Appetite Improves

The US dollar is trading bearish in early trading on Friday, driven lower as the market sentiment improves on the back of better than expected economic data from the US, weakening the safe haven appeal of the reserve currency. At the time of writing, the US dollar index DXY is trading around 90.71.

US stock markets also turned around during the previous session as corporate earnings reports revealed a better performance than previously anticipated. Despite the current weakness, the US dollar is set to post a gain of around 0.4% so far this week, as a result of possible delays and reductions in President Biden’s proposed stimulus package.

Analysts foresee an extended period of weakness for the US dollar into 2021 after the Fed maintained that it would continue with its low interest rates and monetary easing until the US economy recovers to pre-pandemic levels. In 2020, the greenback weakened by almost 7% against its major peers after the Fed brought interest rates close to zero to support the economy through the coronavirus crisis.

The Euro and the AUD are trading steady against the dollar early on Friday after trading bullish during the previous session. Meanwhile, the safe haven Japanese yen continues to weaken against the reserve currency, following a 0.2% loss on Thursday.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.