On Friday, the dollar lost its steam following a period of ascent that left it set for its highest weekly gain since the 2008 global financial crisis, as the COVID-19 crisis resulted in a rush for cash that has run over asset markets.
The dollar went up by 3.5% on a bunch of currencies through a week when investors have liquidated everything ranging from stocks to bonds, gold, and different commodities. The Australian dollar was among the leading currencies of Friday’s part recovery among beaten-down majors with a 3% gain to $0.5897. Sterling surged by 1.5% from a 35-year low to $1.1654.The yen increased by 0.7% to 109.97 per dollar. The South Korean won rallied over 3% from an 11-year low, amid wider gains considering regional stock markets. However, among signs of stress in the financial system still on the rise – even as central banks across the world pump cheap dollars to banks – few expect a reversal of the dollar’s rise.
“People are selling everything and the common thread is they just want cash,” said Stuart Oakley a Singapore-based executive with Nomura, who operates trading of the bank with its clients.
“People just want cash because at the end of the day, people don’t know where their next revenue is coming from and they’ve got payments to meet. I don’t think that’s going to change.”
There’s been all kind of grim news amidst the virus outbreak. An Iranian official in Tehran tweeted that the coronavirus was resulting in death on one person every 10 minutes. In Italy, soldiers were ordered to shift the dead from cemetery worsted by the numbers.
King of the Currencies
On Thursday, California released a stay-at-home order for its 40 million residents, as cases in the United States rose past 13,000.
“The US dollar is doing what it should be doing in times like these: appreciating,” said Bank of America FX analyst Ben Randol.
“We think that the US dollar will continue to appreciate in unstable financial markets on most pairs potentially except yen and Swiss franc,” said Randol, leaving two currencies long regarded as safe-havens.
Already gains of the dollar over the past few weeks have been astounding, and the shoot is a problem for many countries and companies that have borrowed heavy amounts in greenbacks. The Australian dollar has lost about 11% in two weeks, its worst two-week drop since 2008. The central bank of Norway is considering FX mediation after a 20% decrement in the oil-sensitive krone over the same period.
The strain on economies has injected speculation in markets that important nations could drive a new Plaza Accord, the 1985 agreement that resulted in a major central bank’s intervention to weaken a raging dollar.
So far the U.S. Federal Reserve has offered a discount dollar funding facility to nine more central banks so that dollars can wash across the globe.
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