Nixse
0

The Euro Collapsed on Tuesday. What About the Dollar? 

The U.S. dollar remained near a seven-week high on Tuesday. It benefited from a Euro selloff overnight after Covdi-19 lockdowns hindered consumer spending in Germany.

The Euro collapsed to 2-1/2 weeks lows on Monday. Recent data showed retail sales in Europe’s biggest economy plummeted down by more than forecast in December. In addition, the continent is still struggling with coronavirus vaccine rollouts. All those combined, caused the Euro’s selloff, pushing the currency lower.

Joseph Capurso, Commonwealth Bank of Australia’s currency analyst, noted that when traders think about selling Euros, invariably you get some buying of greenbacks because the Euro-dollar exchange rate is one of the most liquid in the world.

Furthermore, some analysts think that a buyback into the dollar was long overdue, with speculators’ net dollar selling near a 10-year high.

Speculators have bet on a drop in the safe-haven greenback as the Biden administration’s proposed 1.9 trillion stimuli has encouraged traders to put money in riskier assets. A group of Republican senators visited the White House to negotiate a $618 billion alternative plan. But so far, without any success.

Yukio Ishizuki, the senior strategist at Daiwa Securities, stated that some hedge funds would probably be forced to unwind their dollar short positions if they get burned by a recent short squeeze in some American shares.

So far, global markets remain cautious. Institutional investors are attempting to get grips with the retail trading frenzy, which pushed forward GameStop Corp and other so-called meme stocks in recent sessions.

How did the currencies trade on Tuesday?

The dollar index lowered slightly by 0.1% to 90.87 amid further gains for Asian stock. However, it remained near its overnight high of 91.063, its highest point since Dec. 10.

The Euro climbed up by 0.2% to $1.20805 after tumbling down by 0.7% on Monday, its lowest level since Jan. 15.

Against the Japanese yen, the greenback briefly surpassed 105 yen for the first time since mid-November. It held firm at 104.875 yen at last.

Most analysts see the U.S. currency’s rebound since early last month as a correction after its relentless drop (The dollar index plunged by almost 7% in 2020) on expectations of a global Covid-19 pandemic recovery.  

However, some believe that the greenback’s newfound firmness could lessen the bearish sentiment on the currency.

Moh Siong Sim, the currency analyst at Bank of Singapore, noted that U.S. interest rates are on the rise and it may be the result of the fiscal stimulus, along with the fact that U.S. economy is holding up well.

  • Support
  • Platform
  • Spread
  • Trading Instrument
Comments Rating 0 (0 reviews)


You might also like

Leave a Reply

User Review
  • Support
    Sending
  • Platform
    Sending
  • Spread
    Sending
  • Trading Instrument
    Sending