FOREX-COVID-19 fears push the dollar higher, riskier currencies fall


reThe dollar index hits its highest level since early April

The currency market remains cautious

Chart: Global exchange rates

LONDON, July 21 (Reuters)Currency markets again showed signs of risk aversion on Wednesday after global markets were spooked earlier in the week by the surge in COVID-19 infections, with the safe haven dollar hitting its highest level since early April .

The Delta variant of the coronavirus replaced inflation as the main concern for investors this week, causing global equities to drop sharply on Monday.

The dollar held firm during the Asian session, but rose as European markets opened. Against a basket of currencies, the dollar was up 0.2% to 93.166 by 07:18 GMT, its highest in 3.5 months.

“COVID market fears seemed too low a month ago, now maybe a bit high,” wrote Elsa Lignos, global head of foreign exchange strategy at RBC Capital Markets, in a client note.

Lignos said she expected fears about the Delta variant to fade as reliance on the vaccine increases, unless a new, more infectious variant of the virus emerges.

The Australian dollar, which is considered a liquid indicator of risk appetite, fell to its lowest level since November 2020, down 0.5% on the day to $ 0.72905. AUD = D3, while the New Zealand dollar was also close to eight-month lows NZD = D3.

Australia’s two largest states reported a surge in new COVID-19 cases on Wednesday, a blow to hopes that lockdown restrictions would be lifted as more than half of the country’s population was subject to stay-at-home orders.

The pound, which hit its lowest since February on Tuesday, fell 0.2% to $ 1.3604 GBP = D3.

Analysts have cited a standoff between Britain and the European Union as a risk factor for the pound sterling. Prime Minister Boris Johnson said his government would present its approach to the Northern Ireland Protocol to the British parliament on Wednesday. Britain’s COVID-19 cases are also on the rise.

The euro was up 0.3% against the commodity-dependent Norwegian krone, with the pair changing hands at 10.6388 EURNOK =. The pair peaked at 10.7038 in the previous session – a seven-month low for the Norwegian krone.

“In general, we view the recent decline in cyclical currencies as a correction rather than a more pronounced trend and expect a rally in higher beta currencies supported by hawkish central banks later this summer,” the strategists wrote. ‘ING in a note to clients.

On a calm day for economic data, currency markets brace for the European Central Bank (ECB) meeting on Thursday. An accommodating tone is expected after ECB President Christine Lagarde foreshadowed a policy adjustment in an interview last week.

The euro was down 0.2% against the dollar at 07:31 GMT, at $ 1.17545, close to its lowest since early April.

The ECB announced a new strategy that allows the bank to tolerate inflation above its 2% target, and Lagarde said policy guidance would be revised to demonstrate the bank’s commitment to the new target.

In cryptocurrencies, bitcoin climbed back above $ 30,000, after dropping below that key level for the first time in a month on Tuesday. At 07:33 GMT it was trading around $ 30,828 BTC = BTSP, while ether was at $ 1,868 ETH = BTSP.

Global exchange rates

(Report by Elizabeth Howcroft edited by Joe Bavier)

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