Dollar Hits 4-week High, Scores Solid Gains Against Peers
The U.S. dollar hit a four-week high on Tuesday as Sterling tumbled amid fears about a no-deal Brexit, and equity markets tumbled amid rising worries about a surge in coronavirus cases.
Traders lapped up the safe-haven dollar after equities tumbled on Wall Street. The sell-off in the technology space spread to other sectors as well, and the major averages all ended with sharp losses today. The Nasdaq tumbled 4.11%, while the Dow and the S&P 500 lost 2.25% and 2.78%, respectively.
The dollar index rose to 93.49, gaining about 0.85%.
Against the Euro, the dollar firmed up to $1.1777, up more than 0.3% from previous close. The euro area economy contracted less than initially estimated in the second quarter but the pace of decline was the most since the records began in 1995 due to the coronavirus containment measures adopted by the member countries, revised data from Eurostat revealed.
Gross domestic product fell by a record 11.8% sequentially but this was revised down from -12.1% estimated initially. GDP had contracted 3.7% in the first quarter.
The annual decline in GDP was revised to 14.7% from 15%. Nonetheless, this was the biggest fall since the series began in 1995 and followed a 3.2% drop in the first quarter of 2020.
The Pound Sterling slumped to $1.2983, losing about 1.4%, amid mounting fears about a no-deal Brexit. U.K.’s top negotiator Frost reportedly said they can no longer afford to go over well-trodden ground, while EU’s chief Brexit negotiator Barnier issued a warning to UK’s PM Johnson saying that if he remains in the Brexit Withdrawal Agreement there will not be future free trade agreement.
The Yen firmed up to 106.03, moving up by about 0.25% a dollar, despite data showing a slightly bigger than expected contraction of Japan’s economy in the second quarter. Due to the restrictions imposed to contain the coronavirus spread, gross domestic product shrank by a record 7.9% sequentially instead of the 7.8% fall estimated initially.
Against the Aussie, the dollar gained in strength, firming up to 0.7213, rising nearly 0.9%.
The Swiss franc was trading at 0.9179 a dollar, compared with previous close of 0.9161, and the Loonie was weaker by more than 1% at 1.3237 a dollar as crude oil prices slumped nearly 8% to a three-month low on weak outlook for energy demand.