US Dollar Jumped to 4-week High on Lockdowns, US Elections
US dollar bounced to the highest level in the last four weeks as a record level of coronavirus infection across Europe and the United States has enhanced investor’s sentiments about the US dollar.
The USD index, which tracks the US dollar against the six major currencies, is currently trading above the 94.10 level. The index gained momentum due to traders move towards safe-haven assets after European countries have announced countrywide lockdowns to stop the virus infections.
Lockdowns impacted the euro and other riskier currencies
The coronavirus infection has constantly been hitting new record levels over the past few weeks, forcing the governments to reinforce social distancing policies.
Several EU member countries announced wide-scale lockdowns to stop the spread.
Meanwhile, the economists believe the latest lockdowns would smash the already battered economies. The European currency performance is also dented by fresh lockdowns. Euro fell to the lowest level in the last two months against the US dollar and British Pound.
“The euro has been selling since infection cases and lockdowns stood out in Europe,”
said Daisuke Uno, the chief strategist at Sumitomo Mitsui Bank.
“But infection cases in other countries, like the U.S., have been on a rise as well. As time goes on, I think increasing coronavirus cases and lockdowns will be common topics in any country, to the extent that they are no longer themes for the currency market,”
US elections are adding to US dollar gains
The volatility related to the US elections is also supporting safe-haven assets.
Joe Biden is likely to win the elections, according to survey results. The market analysts believe Biden will introduce several stimulus packages to help the economy. However, the robust increase in coronavirus infections could also force the new US president to introduce social distancing policies, which could negatively impact the economic recovery.