U.S. Dollar Strengthened after Plunging to a Record Low
The U.S. dollar steadied on Monday after plunging to a 10-week low. Joe Biden’s victory as U.S. President caused the dollar’s collapse. The currency traded against the euro at $1.19, while the Japanese yen was near to an eight-month high.
Meanwhile, riskier currencies, such as the Aussie and Scandinavian currencies, were stronger. The Chinese yuan made the biggest moves among major currencies, hitting a 28-month peak of 6.5501. It last traded higher by 0.6% at 6.5545.
On Monday, the Norwegian crown also surged forward by 0.5% versus the dollar to 9.1135, after skyrocketing to a seven-week high of 9.1020. At the same time, the Swedish crown rallied by 0.4% at 8.6160, after jumping to a 10-week high of 8.6100 before.
Neil Jones, the European head of hedge fund sales at Mizuho, stated that it’s a classic risk preference. The greenback is a safe-haven currency. It is also still the world leader in terms of outperformance in times of risk aversion. That’s why no one would expect it to be on the backfoot when traders prefer to risk. He also added that the market might be a little reluctant to take common currency higher.
What about the Australian dollar and other currencies?
The Aussie surged forward by 0.4% at 0.7286 against its U.S. counterpart, after jumping earlier 0.7301, reaching its highest level since Sept. 21.
Meanwhile, the euro traded at $1.1884 on Monday, flat on the day, after soaring to a two-month high of $1.1899 in the Asian session.
In Europe, German exports increased more than expected in September. Foreign trade boosted Europe’s largest economy as it struggles to avoid tumbling into a double-dip contraction.
The dollar hit a 10-week low earlier as traders heralded Biden’s win in elections by buying risk-on currencies. They think that a calmer White House may boost world commerce. Furthermore, they count on monetary policy remaining easy.
The greenback traded at 103.5 Japanese yen, higher by 0.2% on the day, even though the yen was close to its strongest point since March.
The U.S. dollar index remained steady at 92.21 on Monday, after plummeting down to a 10-week low of 92.12. Meanwhile, the sterling skyrocketed to its highest point in more than two months.
Michael McCarthy, the CMC Markets’ chief strategist in Sydney, noted that the U.S. election outcome is ideal from a market point of view.
However, expectations for a massive U.S. fiscal stimulus package seems to have been lowered. That caused bond yields to drop in anticipation of less borrowing, as well as more quantitative easing from the Federal Reserve.
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