NEW YORK, Nov 21 (Reuters) – The U.S. dollar rose against most major currencies on Monday, reversing recent losses, as new cases of COVID-19 in China raised concerns about the global economic outlook and prompted traders to Avoid risky currencies.
China’s capital warned on Monday that it was facing its toughest test of the COVID-19 pandemic, closing businesses and schools in hard-hit districts and tightening restrictions on entering the city as infections surged in Beijing and nationally.
The new developments have cast doubt on hopes that the government will soon ease its tough restrictions. This boosted the dollar, which is seen as a safe haven in times of stress.
The dollar rose 1.2% against the Japanese yen to 142,085 yen, the pace for its biggest one-day gain since Sept. 6. The euro fell 0.86% against the greenback to $1.0235.
John Doyle, vice president of trading and trading at Monex USA, said: “All eyes are on China today and their COVID Zero policy. Traders are concerned that China will expand its restrictions which could slow growth and threaten higher inflation.”
“The depression is seen across asset classes,” Doyle said.
In China, the onshore yuan opened at 7.1451 per dollar and fell to a low of 7.1708, the weakest level since November 11.
With investors taking a tougher view of riskier currencies, the Australian dollar, seen as a soft proxy for risk appetite, fell 1.1% to a 1-week low of $0.66.
The dollar found further support after San Francisco Federal Reserve Bank President Mary Daly said Monday that the U.S. central bank could raise its overnight target rate to 5% if inflation does not cool, even though she thought that was not the expected outcome for monetary policy.
Analysts are also attributing some of the dollar’s strength to a rebound after the sharp sell-off of the last few weeks that saw the Dollar Index fall as much as 4.7% in November.
Kit Juckes, chief FX strategist at Societe Generale, said: “I view the dollar’s rise this morning as a reflection of recent weakness, not a sign that anything is changing.”
Cooler-than-expected U.S. inflation data fueled investors’ hopes that the Federal Reserve’s dollar-boosting interest rate hikes may be moderated. This allowed traders to take advantage of existing long dollar positions.
Speculators’ bets on the U.S. dollar fell for the first time in a year, according to calculations by Reuters and the Commodity Futures Trading Commission released on Friday. read more
The dollar index remains up about 12% for the year.
Investors will be poring over the details from the Fed’s November meeting, which will be released on Wednesday, for any signal on the outlook for interest rates.
On Monday, the stronger dollar weighed on sterling and the British pound fell 0.5 percent to $1.18225 against a stronger U.S. dollar as investors waited for Tuesday’s general financial data and Wednesday’s PMI numbers. were prepared for further weakening of the pound.
Elsewhere, cryptocurrencies remained under pressure, with bitcoin down about 3% to $15,740, after hitting a two-year low of $15,588 in the session.
The crypto industry continues to reel from the high-profile collapse of crypto exchange FTX, which owes its top 50 creditors nearly $3.1 billion, according to bankruptcy filings.
Reporting by Saqib Iqbal Ahmed, Editing by William Maclean and Nick Zieminski
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