AGL 24.40 Increased By ▲ 1.46 (6.36%)
AIRLINK 109.29 Decreased By ▼ -2.00 (-1.8%)
BOP 5.29 Increased By ▲ 0.04 (0.76%)
CNERGY 3.67 Decreased By ▼ -0.05 (-1.34%)
DCL 8.00 Increased By ▲ 0.01 (0.13%)
DFML 44.30 Increased By ▲ 4.03 (10.01%)
DGKC 88.80 Increased By ▲ 0.80 (0.91%)
FCCL 21.99 No Change ▼ 0.00 (0%)
FFBL 42.28 Increased By ▲ 0.08 (0.19%)
FFL 8.90 Increased By ▲ 0.35 (4.09%)
HUBC 151.70 Decreased By ▼ -1.59 (-1.04%)
HUMNL 10.35 Decreased By ▼ -0.10 (-0.96%)
KEL 4.45 Decreased By ▼ -0.05 (-1.11%)
KOSM 3.95 Increased By ▲ 0.10 (2.6%)
MLCF 36.60 Decreased By ▼ -0.20 (-0.54%)
NBP 49.16 Increased By ▲ 1.17 (2.44%)
OGDC 131.70 Decreased By ▼ -0.10 (-0.08%)
PAEL 26.31 Increased By ▲ 0.16 (0.61%)
PIBTL 6.07 Increased By ▲ 0.04 (0.66%)
PPL 115.45 Decreased By ▼ -0.05 (-0.04%)
PRL 22.67 Increased By ▲ 0.07 (0.31%)
PTC 12.50 Decreased By ▼ -0.08 (-0.64%)
SEARL 56.19 Increased By ▲ 0.50 (0.9%)
TELE 7.40 Increased By ▲ 0.20 (2.78%)
TOMCL 37.69 Increased By ▲ 0.69 (1.86%)
TPLP 8.34 Increased By ▲ 0.49 (6.24%)
TREET 15.33 Increased By ▲ 0.03 (0.2%)
TRG 59.96 Increased By ▲ 5.41 (9.92%)
UNITY 32.34 Increased By ▲ 0.48 (1.51%)
WTL 1.18 Increased By ▲ 0.01 (0.85%)
BR100 8,408 Increased By 63.1 (0.76%)
BR30 26,449 Increased By 101.3 (0.38%)
KSE100 79,397 Increased By 409.9 (0.52%)
KSE30 25,518 Increased By 153.1 (0.6%)
Markets

Dollar near two-month highs on relative strength of US recovery

  • The dollar index has rebounded 1.2% this year after an almost 7% decline in 2020.
Published February 3, 2021

TOKYO: The dollar traded near a two-month high versus the euro on Wednesday as investors looked to a widening disparity between the strength of the US and Europe's pandemic recoveries.

The view was bolstered by moves in Washington toward fast-tracking more stimulus spending that contrasted with concerns about extended European lockdowns and expectations for a decline in euro zone growth this quarter.

The dollar was little changed at $1.2038 per euro early in the Asian session, after strengthening to $1.20115 overnight for the first time since Dec. 1.

The broader dollar index was mostly flat at 91.081 after rising to a two-month high of 91.283 in the previous session.

The greenback's advances come despite a rise in equities amid improving risk sentiment, defying the currency's historic inverse directional relationship with stocks.

However, many analysts expect the correlation to reassert itself as the year progresses, and for the dollar to decline as global growth recovers amid massive fiscal stimulus and ultra-easy monetary policy.

"The relative growth dynamics between Europe -- weak -- and the US -- better -- are favouring the USD at the moment, but it remains to be seen if this can be a longer-lasting theme," wrote National Australia Bank FX strategist Rodrigo Catril, who expects the euro to weaken below $1.20 in the near-term.

The dollar also benefited from a massive bout of short-covering, especially against the yen where hedge funds had racked up their biggest short bets against the greenback since October 2016.

The US currency was little changed at 105.025 yen after gaining to 105.17 overnight for the first time since Nov. 12.

Many see the dollar's rebound since early last month as a correction after its relentless decline last year, although some think the dollar's new-found firmness could reflect a retreat of the bearish sentiment on the currency.

The dollar index has rebounded 1.2% this year after an almost 7% decline in 2020.

"The bear case is facing a short-term stress test," Westpac strategists wrote in a note.

"Our base case is that without short-term yield support there's a limit to how far US recovery optimism can boost the USD," they wrote. "Global reflation and the Fed's determined dovish stance limits upside potential beyond that."

Comments

Comments are closed.