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Forex: The dollar gains ground in the week

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This Friday the dollar gains ground in the Forex market, establishing its best week of the month.

This is due to fear caused by new outbreaks of coronavirus, leading investors to be wary of a rapid economic recovery. Consequently, feeling attracted to the security of the world reserve currency: the dollar.

Forex: Rise in the dollar index

The market focus is aimed at increasing coronavirus cases and hospitalizations in many US states. this week. This reality causes considerable national concern, as the increase in the number of daily infections after more than a month of decline reflects a lack of rapid economic recovery.

However, thanks to this preference for safe-haven assets, the dollar gains ground in Forex this week, presenting a small advance of 0.51% against a basket of currencies. This has been their best performance since mid-May.

The currency increased 0.18% near noon, reaching 97.61 points, bordering on its highest levels since June 2.

Graph of the activity on Friday, representing the increase in the dollar index. Source: Yahoo! Finance

In addition, more than 150 new cases of coronavirus have been detected in Beijin since last week, further puzzling investors. They fear global quarantines will reoccur as the city’s alert level has increased. Of course, this fact caused the increase in the dollar.

Juan Pérez, senior currency trader and strategist at Tempus, Inc. opines on this trend:

With COVID-19 and how it relates to the economy, we know this is not going to go away and we are going to have to learn to cope with it. Of course, with that comes a bit of risk in the market (…) There was a belief that the economic recovery would be strong, but now there are doubts

He added, however, that the big impact on the US economy, compared to the rest of the world, would ultimately fall on the dollar. This despite its attractiveness as a safe haven.

The euro in the Forex market

On the other hand, contrary to the increase in the dollar, the euro weakened slightly, with a 0.12% drop to US $ 1,119. This occurred at the start of a European Union summit to discuss a US $ 750 billion coronavirus recovery fund.

According to diplomatic officials, the head of the European Central Bank, Christine Lagarde, told EU leaders that her economy was in a “dramatic drop”And asked them to act to spearhead the revival.

Furthermore, Sweden, Denmark, Austria and the Netherlands point out that the proposed recovery fund is too large. They also consider that the allocation of money is not sufficiently linked to the pandemic.

And you, do you think that the increase in the dollar index will continue or collapse? We await your opinion in the comment box.



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