The Dollar strengthened on Friday as speculators decided to seek safe zones following Austria’s announcement that it would be the first nation in Western Europe to reinstate a full shutdown in response to an increase in COVID-19 outbreaks and Germany’s announcement that it might follow suit, which sent the Euro lower. The Dollar index, which measures the Greenback’s value against a composite of six major counterparts, was up 0.489% to 96.029, close to Wednesday’s 16-month high of 96.266. For the week, the Greenback gained almost 1%.
DXY CHART Source: Tradingview.com
Whereas the Euro, which has been under pressure all week, fell to a 16-month low amidst Europe’s COVID spike and growing predictions that interest rates will be lifted more aggressively overseas, notably in the United States. Federal Reserve Director Christopher Waller said the US monetary authority should accelerate the pace of its asset purchases to allow it greater freedom to increase interest rates from its near-zero position quicker than anticipated if strong inflation and robust job growth remain.
Separately, Fed Vice Chair Richard Clarida stated that it “may very well be fair” to consider accelerating the Fed’s asset buy wind-down whenever it gathers next on Dec. 14-15. “The Buck is unquestionably gaining at the moment from signals of a growing US economy and safe-haven movements prompted by fresh fears about the virus,” said Joe Manimbo, chief industry analyst at Western Union Business Solutions.
Turmoil All Round
In addition to a lockdown, Austria announced that it will require all residents to be inoculated against COVID-19 beginning Feb. 1, while Germany’s minister of health warned that lockdown restrictions might be reinstated. “One thing is for sure: if the entire European Union were to be placed under lockdown again, and based on how lengthy that would persist, we would have to reassess our growth prospects,” said Stephane Ekolo, international equities analyst at brokerage Tradition.
Commodity-linked assets, such as the Australian, New Zealand, and Canadian Dollars, which are sometimes regarded as risky, have all fallen. The Euro has lost more than 1% against the USD this week and was trading at $1.12895, down 0.74% on the day, having previously reached $1.1248, its lowest level since July 2020. On Friday, European Central Bank Head Christine Lagarde reaffirmed her cautious stance, saying the ECB must avoid tightening policy, which would jeopardize the recovery.
The Australian Dollar was down 0.58 % to $0.72335 and the New Zealand Dollar was down 0.72% to $0.69945. The Canadian Dollar fell 0.42%, falling to 1.2652 U.S. Dollars. The Japanese Yen, which is widely seen as a safe-haven currency, rose on Austria’s lockdown news, rising 0.22% to 113.99 Yen against the Dollar. Sterling has given up some of its recent gains and is down 0.39% at approximately $1.3448. Bitcoin fell below $60,000 and was on track for its lowest week in 6 months, closing at roughly $58,000.