US Dollar Gains On Investor Concerns
Currency Converter Calculator's Forex News Roundups aim to keep FX traders and enthusiasts up to date on the latest developments and analysis in the global currency exchange market, focusing on the US Dollar (USD) and other major currencies.
In this edition, we look at why the Greenback has seemingly regained its status as the safe-haven asset of choice, and how other currency pairs have been fairing in these tumultuous times.
USD Gains As Covid-19 Continues to Plague US
The US Dollar achieved strong gains towards the end of the working week against a slew of other major currencies, including the Great British Pound (GBP), the Japanese Yen (JPY), and the Swedish Krona (SEK).
Specifically, the Dollar appreciated around 0.3 percent relative to a basket of currencies, as represented by the increase in the American Dollar Index's value to 93.025.
This was due to a number of developments, which all made investors look for safer investment opportunities and therefore increased demand for the Greenback.
Such developments and factors include the coronavirus pandemic continuing to plague many States across the US, in turn leading to a continuation of government-mandated lockdowns, which have resulted in millions of workers being laid off.
News that Congress won't be able to pass an economic stimulus package anytime soon also drove up investor demand for safe-haven assets.
Is the Greenback Once Again the Safe Haven Asset of Choice?
In recent weeks, we had seen gold emerge as the safe-haven asset of choice, with investors seemingly attracted to the precious metal due to its strong performance over the course of the year (it's up by over 20 percent since the start of 2020, and silver has also had a very strong run.)
At the same time, the trend of the US Dollar gaining in response to negative economic news appeared to have temporarily reversed, with the Greenback falling whenever poor economic data was revealed and in response to the Covid-19 pandemic.
The Dollar's most recent price movements suggest the more conventional trend has returned. Still, it's impossible to determine at this point whether investors prefer the USD or gold when looking for a safe haven asset to invest in.
GBP Appreciates Against Some Currency Rivals
The Pound saw modest gains towards the end of the week before dropping off slightly against the USD and the Euro (EUR) on Friday. It is currently trading at around 1.31 against the US Dollar and 1.11 against the Euro.
Analysts have stressed that Brexit negotiations and the speed of the UK's economic post-COVID recovery are the most important factors in determining Sterling's value over the coming weeks and months.
The respective recoveries of the United States and continental Europe will also affect the Pound's value.
A Quick Summary
- The US Dollar is continuing to dominate the headlines in the Forex press, with the Greenback gaining against a basket of currencies towards the end of the week.
- Perhaps more importantly, the USD appears to have reemerged as the safe-haven investment of choice, though it's difficult to tell if it is preferred over gold.
- In any case, the trend of the Dollar gaining on poor economic data and news at least seems to have returned for the time being.
- The Pound also gained over the course of the week but later fell slightly against the dollar and the Euro.
- Brexit negotiations and the pandemic will be the most important determinants of the GBP's value over the coming months.