Dollar shines, euro suffers

On Monday, the safe-haven US dollar traded near a 16-month high against the euro, reflecting growing concern about the impact of rising Covid-19 infections in Europe, with Austria reimposing a complete lockdown and Germany considering doing the same.

Since early October, the dollar was near its highest level against the riskier Australian and Canadian currencies. The commodity-linked coins were also under pressure from a drop in crude oil prices.

Bullish comments by Federal Reserve officials Richard Clarida and Christopher Waller bolstered the dollar on Friday. Given the economy’s rapid recovery and high inflation, he suggested that a faster pace of stimulus tapering might be appropriate.

An earlier end to tapering raises the prospect of earlier interest-rate increases. The market currently expects the Federal Open Market Committee (FOMC) to begin raising interest rates by the middle of next year. The dollar index, which compares the greenback to six major currencies, was trading at 96.065, close to last week’s 16-month high of 96.266.

The fourth wave of infections has triggered a national emergency in Germany, Europe’s largest economy, according to Health Minister Jens Spahn, who warns that vaccinations alone will not reduce case numbers. From Monday, Austria will be the first country in Western Europe to reimpose a complete Covid-19 lockdown.

Concerns that a European slowdown would reduce energy demand weighed on crude oil, also down on the prospect of a U.S.-led release of emergency stockpiles.

Currencies

The dollar gained 0.21 percent against the oil-linked Canadian loonie, reaching C$1.26575, closing in on Friday’s high of C$1.2663, the highest level since Oct. 1.

The Australian dollar fell slightly to $0.7234 after falling as low as $0.72285, the lowest level since Oct. 6. The dollar was essentially unchanged against the yen, changing hands at 114.03 yen per dollar, roughly in the middle of its range over the previous week and a half.

Bitcoin was trading around 58,100 in cryptocurrency, consolidating after falling from an all-time high of 69,000 earlier this month.

The euro fell 0.23 percent to $1.1274, approaching its lowest level since July of last year at $1.1250, which it reached on Friday when it fell 0.66 percent. The EURUSD has been in free fall and will likely receive the lion’s share of attention from clients looking for a way to profit from Europe’s increasing restrictions and tensions.