The U.S dollar remained firm at the last trading session of the week. Despite a significant improvement in risk appetite across global financial markets, investors are flocking into the safe-haven currency, as COVID-19 remains a major headache.
What you should know: The dollar index, at the time of drafting this report, was up by 0.15% to trade at 90.662 at Friday’s early session in London.
The U.S dollar index is on track for a 0.5% weekly gain, following record buying at the start of the week amid concerns that President Joe Biden’s fiscal spending package will not be as large as earlier anticipated.
- The U.S. Dollar Index tracks the American dollar against a basket of other major currencies (like the Japanese yen, British pound sterling, Swedish Krona, and Euro).
- Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries like Europe, and Japan, would need to pay fewer dollars in meeting such obligations.
Stephen Innes, Chief Global Market Strategist at Axi, gave critical insights to macros affecting the U.S dollar’s arch-rivals.
“A sharp sell-off in iron ore prices is a worrisome development for commodity linkers, more so Latin American producer and their currencies. China tightens bleeds into Asia risk assets like iron ore.
“GBP is not showing the kind of sensitivity to risk. The lack of drama in much of the FX market may reflect a view that equity market tribulations are stock-specific VAR-styled sell-offs in nature rather than a reflection of global risk themes that would carry significant bond or cross-asset leakage.”