Dollar firms from 7-week lows as risk appetite fades
- The euro was down 0.25% at $1.2000, after touching a seven-week high of $1.2079 overnight.
LONDON: The U.S. dollar firmed on Wednesday, rising from a seven-week low hit overnight, as broad-based weakness in stock markets triggered by a resurgence of COVID-19 cases in countries from India to Japan fuelled renewed appetite for the greenback.
The safety bid also supported the Swiss franc and the Japanese yen as the outlook for the global economy soured.
The dollar index, which tracks the U.S. currency against six major peers, was up 0.14% at 91.347 in early London trading after slumping as low as 90.856 on Tuesday for the first time since March 3. It has declined 2.4% so far this month.
The greenback's bounce was also accompanied by softer U.S. Treasury yields as investors weighed the surge in COVID-19 cases against a broad-based selloff in the U.S. dollar in recent weeks despite strong U.S. employment and retail sales data.
Thu Lan Nguyen, a strategist at Commerzbank said more positive U.S. data could easily kick-start another dollar rally, particularly if the uneven pace of vaccinations fuels greater demand for U.S. Treasuries as a hedge against a crisis.
"So for now, U.S. dollar bears should make sure that they don't get excited too soon," she said in a note.
The benchmark 10-year Treasury yield was around 1.58%, not far from its lowest since mid-March, as it continued to consolidate following its retreat from the 14-month high at 1.7760% reached at the end of last month.
The euro was down 0.25% at $1.2000, after touching a seven-week high of $1.2079 overnight.
The European Central Bank decides policy on Thursday, with the Federal Reserve following next week.
Declines in U.S. yields and the dollar in April have come as evidence mounted that the Fed would be slower in tightening monetary policy than it had appeared to the market.
Broadly, pandemic developments triggered investor caution.
India reported 1,761 deaths from COVID-19, its highest daily toll, while Canada and the United States extended a land-border closure for non-essential travellers
The Australian dollar, a barometer for risk appetite, nursed losses at $0.7717 after weakening 0.4% overnight.
In cryptocurrencies, bitcoin traded around $55,000, consolidating following its dip to as low as $51,541.16 on Sunday. It set a record high at $64,895.22 on April 14.
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