U.S. dollar banknotes are laid out for a photograph on September 7, 2017 in Hong Kong.
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The safe haven US dollar traded near a 16-month high against the euro on Monday amid growing anxiety over the impact of the spike in Covid-19 infections in Europe, the Austria reimposing a full lockdown and Germany considering doing the same.
The greenback was near its strongest since early October against the riskier Australian and Canadian dollars as commodity-linked currencies also came under pressure from a drop in crude oil.
The dollar received additional support from bullish comments from Federal Reserve officials Richard Clarida and Christopher Waller on Friday, who suggested that a faster pace of stimulus reduction may be appropriate amid an accelerating recovery. and high inflation.
An earlier end of tapering also increases the possibility of earlier increases in interest rates. Currently, the market price is set by the Federal Open Market Committee (FOMC) to begin raising rates by the middle of next year.
The dollar index, which values the currency against six major peers, traded at 96.065, staying within sight of last week’s high of 96.266.
The euro fell 0.23% to $ 1.1274, approaching its lowest since July of last year at $ 1.1250, reached on Friday, when it fell 0.66%.
“The EURUSD is in free fall and will likely attract the lion’s share of attention from clients looking for a game to the growing restrictions and tensions across Europe,” wrote Chris Weston, head of search at broker Pepperstone in Melbourne, in a note to clients. .
“For momentum, trend followers and tactical traders, the short euro remains attractive here.”
Europe has once again become the epicenter of the pandemic, accounting for half of the cases and deaths worldwide.
A fourth wave of infections has plunged Germany, Europe’s largest economy, into a national emergency, Health Minister Jens Spahn said, warning that vaccinations alone will not reduce the number of cases.
Austria becomes the first country in Western Europe to re-impose a full Covid-19 lockdown from Monday.
Concerns that a slowdown in Europe could affect demand for energy rocked crude oil, which was also sagging amid the prospect of an emergency stockpile release led by the United States.
The dollar added 0.21% against the Canadian loonie tied to oil at C $ 1.26575, closing Friday’s high at C $ 1.2663, the highest level since October 1.
The Aussie eased slightly to $ 0.7234, and plunged earlier to $ 0.72285, the lowest point since October 6.
“We expect the AUD to remain heavy in the near term (and) a decline to $ 0.70 is possible,” with a slowdown in the Chinese economy and the accommodative policy of the Reserve Bank of Australia which weighs on currency, Joseph Capurso, a strategist at Australia’s Commonwealth Bank, wrote in a report.
Meanwhile, “the USD may extend its recent rally this week and set a new high in 2021,” he said. “Another round of high inflation in the United States may further propel market prices from FOMC and USD rate hikes.”
The dollar was largely stable against the safe haven of the yen, changing hands at 114.03 yen to the dollar, in the middle of its range over the past week and a half.
In crypto, bitcoin traded around $ 58,100, consolidating after retreating from an all-time high of $ 69,000, marked earlier this month.