Dollar hits two-week peak as ‘second wave’ virus fears drive safe-haven bid

The dollar rose to a two-week high against major peers on Tuesday, propelled by rising US bond yields and increasing safe-haven demand amid growing fears about a second wave of coronavirus infections, which sent riskier currencies lower.

The biggest loser was the Australian dollar, which dropped about 0.8% to a one-week low, while the kiwi extended falls.

The euro fell below $1.08 for the first time in almost a week and the Japanese yen nursed an overnight loss of about 1% to sit at to 107.48 per dollar, the bottom end of a range it has kept since mid April.

The greenback was buoyed by a steepening US yield curve, as Federal Reserve officials talked down the prospect of negative rates, and as the bond market braces for an immense borrowing spree from the US Treasury.

At the same time, progress on plans to re-open economies has been overshadowed by worries about fresh infections of COVID-19 as easing of restrictions in South Korea and Germany were soon met by spikes in new cases there.

“It’s a little bit of yield support (for the dollar) and a general return of nerves,” said Westpac FX analyst Sean Callow, as April’s surge in riskier currencies fades away.

The kiwi slid 0.4% to $0.6047, while the euro and pound were a tad softer. The euro last sat at $1.0797 and the pound slipped 0.3% $1.2300.

Besides virus headlines, markets are looking to Chinese consumer inflation data due at 0130 GMT, where an annual rise of 3.7% is expected, according to a Reuters poll of economists.

Fed officials James Bullard and Patrick Harker are due to make remarks at 1300 GMT and 1400 GMT, respectively, ahead of a highly anticipated speech from chairman Jerome Powell on Wednesday.

Source: SABC News (sabcnews.com)