This Friday, the dollar gained ground in the Forex market, setting its best week in the entire month.
This is due to the fear caused by new outbreaks of coronavirus, leading investors to be wary of a quick economic recovery. By consequence, attracted to the security of the world’s reserve currency: the dollar.
Forex: the Rise of the dollar index
The center of attention of the markets is directed to the rising cases of coronavirus and hospitalizations in many states of the US this week. This reality causes a national concern considerable, as the increase in the number of infections, a day after more than a month’s decline reflects a lack of fast economic recovery.
However, thanks to this preference for haven assets, the dollar gains ground in Forex trading this week, introducing a small feed of 0.51% against a basket of currencies. This has been his best performance since mid-may.
The currency rose 0.18% near midday, reaching up to 97.61 points, touching its highest levels since June 2.
Graph of the activity of the day on Friday, representing the increase in the dollar index. Source: Yahoo! Finance
In addition, we have detected more than 150 new cases of coronavirus in Beijing since last week, most disconcerting to investors. Fear that will happen again, the quarantine is global, as it has increased the alert level of the city. Of course, this fact causing the rise of the dollar.
John smith, merchant, senior foreign exchange strategist at Tempus, Inc. he says about this trend:
“With the COVID-19 and how it relates to the economy, we know that this is not going to disappear and we’re going to have to learn to cope with it. Of course, with that comes a little bit of risk in the market (…) there Was a belief that the economic recovery would be strong, but now there are doubts.“
He added, however, that the great impact on the american economy, in comparison with the rest of the world, would fall ultimately on the dollar. This in spite of its attractiveness as a safe haven.
The euro in the Forex market
On the other hand, contrary to the increase of the dollar, the euro weakened slightly, dropping 0.12% to$ 1,119. This happened at the start of a summit of the European Union, which should be a recovery fund of the coronavirus$ 750,000 million
According to diplomatic officials, the head of the European Central Bank, Christine Lagarde, said the leaders of the EU that its economy was in a “dramatic drop” and asked them to act to lead the revival.
In addition, Sweden, Denmark, Austria and the Netherlands, point out that the recovery fund proposed is too large. Also consider that the allocation of money is not sufficiently linked to the pandemic.
And you, do you think that the increase in the dollar index will continue or subside?We look forward to your opinion in the comment box.