Dollar- delta worries
Despite hopes that the delta coronavirus strain will not disrupt the global economic recovery, the dollar remained at a one-week low against crucial rivals on Thursday. Investors are now looking to the Fed’s Jackson Hole symposium on Friday. They will be looking for clues on the timing of monetary stimulus withdrawal.
The dollar index, which compares the U.S. currency to six others, climbed 0.05 percent to 92.867 after dipping to 92.801 overnight for the first time since August 17.
The Australian dollar, typically seen as a measure of risk appetite, fell 0.07 percent to $0.7269. It has remained close to the previous day’s one-week high of $0.72805.
The dollar was changed against the euro, trading at $1.1765 after touching a one-week low of $1.1775.
It increased by 0.05 percent to 110.06 yen, another haven currency that has been trading towards the middle of its trading range since early July.
In Jackson Hole, Wyoming, the focus will be on Fed Chair Jerome Powell’s address. Traders will no doubt be looking for hints on the timing and pace of monetary stimulus withdrawal.
Since the U.S. Food and Drug Administration formally authorized the Covid-19 vaccine created by Pfizer and BioNTech on Monday. Investors have become more confident about the chances, perhaps speeding up U.S. vaccinations. The S&P 500 and Nasdaq both closed at all-time highs on Wednesday, as U.S. rates edged higher, with the benchmark 10-year Treasury yield topping 1.352 percent for the first time since August 13.
Last Friday, the dollar index reached a 9-1/2-month high of 93.734, indicating that Fed officials expected a taper this year. That was before Dallas Fed President Robert Kaplan, one of the U.S. central bank’s most vocal supporters of beginning to withdraw assistance for the economy, indicated he could need to change his mind if the coronavirus significantly slows economic development.
Some analysts believe the dollar will continue to rise if the start of a stimulus taper becomes a reality, even if the pandemic’s uncertainty delays it.
While this would be a negative factor for the USD on the one hand, delta concerns may strengthen the USD’s safe-haven appeal. This is according to Jane Foley, a strategist at Rabobank.
On balance, pullbacks are likely to be par for the course. However, we see EUR/USD heading towards $1.16 in the next six months.