Rush for Dollar Safety Rises
The dollar rose on Wednesday as manufacturing data in Asia presented a severe economic slowdown. Traders continued to search for a safe-haven as the region tries to combat the COVID-19 pandemic.
The U.S. Dollar Index stood at 99.430 up 0.3%, while EUR/USD dropped 0.4% to 1.0980 in forex trading. Moreover, the GBP/USD fell 0.56 to 1.2353 as the USD/JPY climbed 0.1% to 107.61.
According to the latest Purchasing Managers’ Index surveys, factory activity declined sharply in most Asian countries in March. Japan and South Korea have posted their biggest contractions in about a decade.
The U.S. Fed has allowed foreign central banks to exchange their holdings of U.S. Treasury securities for overnight dollar loans. This has broadened the ability of dozens of foreign central banks to access the USD during the virus crisis. However, this news has affected the greenback’s gains.
The central bank pumped more USD into the system to calm markets to limit its gains in forex today.
Moreover, the Fed has purchased U.S. bonds at an unprecedented rate as well as implemented programs to support credit markets.
Kyle Rodda, an analyst at broker IG Markets said the Fed clearly wants to do everything it can to ensure USD liquidity. It puts downward pressure on the USD, he added.
Some of the regions hardest hit were Central and Eastern Europe. These areas try to cope with the economic downturn as well as face political uncertainty.
The Worsening Coronavirus Pandemic
The rush for the dollar safety continued to rise after scientists said the virus could kill up to 240,000 Americans. This is probable despite social distancing measures.
Two doctors displayed that grim projection at the White House on Tuesday and called it their “real number.” Dr. Anthony S. Fauci is the nation’s leading infectious disease expert, and Dr. Deborah L. Birx, coordinates the coronavirus response.
COVID-19 has now killed over 42,000 people and infected more than 851,000 in 205 countries.
Minori Uchida, the Chief Currency Analyst at MUFG Bank said he does not expect the US currency to rise like last month’s. Given that the Fed has been pumping USD, he added. He also said, the USD is likely to slip further against the yen.
Meanwhile, in the FX markets, the USD/JPY pair went up 0.24% to 107.78. Moreover, the AUD/USD pair slid 0.11% to 0.6128 while the NZD/USD pair rose 0.03% to 0.5954.
The USD/CNY pair rose 0.1% to 7.0880 and the GBP/USD pair gained 0.27% to 1.2384.
