By Peter Nurse
Investing.com - The dollar traded at multi-month highs in Europe Tuesday, continuing to benefit from its safe haven status amid concerns rising Covid-19 will hinder the global economic recovery.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 92.953, climbing to levels not seen since February.
EUR/USD fell 0.1% to 1.1780, after dipping overnight to the lowest since early April, USD/JPY rose 0.1% to 109.51, GBP/USD dropped 0.1% to 1.3660, after falling to the lowest level since early February in the previous session, while the risk-sensitive AUD/USD fell 0.3% to 0.7321, an almost-eight-month low.
The highly-contagious delta variant of the Covid-19 virus is now the dominant strain worldwide, and this has resulted in a jump in coronavirus cases across Asia, where vaccination programs are in their infancy, and also in parts of Europe and the United States, largely among the unvaccinated.
The average number of daily new Covid-19 cases in the United States has tripled in the past 30 days, according to an analysis of Reuters data, climbing over 30,000 on the weekend.
“Concerns that the delta mutation will slow, or even reverse, the recovery efforts appeared to be sapping risk-taking appetites,” said Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, in a note.
Elsewhere, USD/CNY dropped slightly to 6.4872 after China’s central bank kept its benchmark lending rate unchanged at its monthly fixing on Tuesday.
Expectations for a cut had been growing after a surprise lowering of bank reserve requirements earlier this month, prompting questions over whether that move was merely the fine-tuning of banking system liquidity or the starting of an easing cycle to combat the economic slowdown.
Thursday sees the latest policy meeting of the European Central Bank, the first at which the bank will have to discuss how to implement its new strategy. Analysts expect it to turn more dovish, despite the current surge in inflation. German producer price inflation climbed to a 40-year high, according to figures released by Destatis earlier Tuesday.
“Interesting tapering decisions are upcoming from both the Fed and the ECB. We find that the scope for an aggressive wind-down of purchases is bigger for the Fed than the ECB and hence see a stronger USD on the cards,” said analysts at Nordea, in a note.