The dollar climbed higher on Friday, with investors becoming even more risk-averse, as fears increase over worries of a second wave of the COVID-19 pandemic. Given the possibility of renewed lockdowns to contain the spread, investors have started seeking safe-haven assets.
These fears are not farfetched, with the U.S. reporting over 2 million COVID-19 cases as at today, June 12, and other states reporting increased numbers of coronavirus infections. At 3.30 pm local time, the dollar index, which tracks the currency against six other currencies, was up marginally at 96.85.
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What it means for Nigerians
Tracking the dollar index helps Nigerians assess the exchange rate value of the dollar in relation to other major currencies. Such currencies include the Euro, British pounds sterling, as well as the Japanese yen, for processing payment obligations.
Analysts at Danske Bank, in a research note, explained that “The three most populous states, California, Texas and Florida, all struggle with high levels of new infections and Texas and Florida have seen a renewed increase lately. This may be spooking the markets as to getting the virus under control and seeing a continued normalization, including a ramp-up in spending.”
This follows after the impact recorded as a result of the uncertainty of the policy meeting that was concluded on Wednesday by the U.S. Federal Reserve.
More so, the Sterling too, has weakened over data revealing Britain’s economic shrink by a whopping 20.4% in April from March, as a result of stringent lockdown measures to curb the pandemic. To this end, GBP/USD dropped by 0.1% to 1.2583 and EUR/GBP gained 0.3% to 0.8986.