Let us check what is happening in the market. Uncertainty surrounding the upcoming United States elections and rising coronavirus infections in Europe turned markets cautious. Thus, on Friday, the United States dollar extended its gains and was on track for its best week since early April. Meanwhile, riskier currencies sold off.
This week, Coronavirus cases have surged. Thus, it prompted lockdown measures in Britain. European Union health officials warned of a ‘twindemic’ of both flu and COVID-19. Therefore, they urged governments not to let their guard down.
Currency moves were closely correlated with share indexes. This week it has fallen sharply. It was because markets re-evaluated the shape of possible recovery from the pandemic.
The United States dollar index, at 1132 GMT, was at 94.563, up 0.3% on the day. In nearly six months, it is on track for its best week. Nevertheless, it is still down 2.5% so far in September.
The United States
Neil Jones is head and senior director of FX sales at Mizuho. So, he said that the United States dollar does well under lower asset prices and risk-aversion conditions. It is not to the same extent that we saw in March/April. Nevertheless, it is certainly enough to take notice.
Moreover, Jones added that correlation continues to re-emerge. It is proving quite reliable.
Also, Jones said that the mechanics behind the United States dollar strength might be because of a combination of short-covering. It is because of quite long-euro, short-dollar positions. Moreover, investors are selling assets and putting the proceeds into a United States dollar account.
At 1136 GMT, the euro decreased 0.3% at $1.16365. It was close to two-month lows hit on Thursday.
Riskier currencies fell.
The Australian dollar will end the week down 3.5%. It is its worst since March. Furthermore, in the week, the New Zealand dollar is down 3%.
That is the current news of the market.