By Peter Nurse
Investing.com - The dollar has strengthened in early European trade Monday, with investors seeking out this safe haven after the Covid-19 outbreak forced the biggest reversal of U.S. economic reopening to date and the U.S. and China squared off over territorial disputes in the South China Sea.
At 3 AM ET (0700 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.2% at 96.547. USD/JPY was up 0.1% at 107.31.
The number of Covid-19 cases globally has now passed the 13 million mark, according to Johns Hopkins University data, jumping by one million cases over the last five days.
This has resulted in demand for the dollar as hopes of a quick economic recovery fall, with some countries, including the U.S., re-imposing lockdown measures to curb the spread of the virus.
Adding to demand for the greenback Tuesday has been the fresh tensions between the U.S. and China, the two global superpowers, this time over China’s ambitions in the South China Sea.
Sterling sold off Tuesday, not helped by signs of a very tepid recovery from the Covid-19 crisis in May after lockdown restrictions began to ease.
Gross domestic product rose by just 1.8% in May after slumping by a record 20.3% in April, Britain's first full month of lockdown. This was a smaller rise than the average 5.5% increase widely expected.
GBP/USD traded 0.1% lower at 1.2538, while EUR/GBP pushed 0.2% higher to 0.9048.
The euro has generally been in demand of late, climbing 0.7% against the dollar this week, trading just below a one-month high reached on Monday.
The single currency is “consolidating its role as the most overbought currency in the G10 ahead of a busy period in the eurozone, with the European Central Bank meeting and the EU summit on the Recovery Fund possibly revamping EUR volatility in the coming days,” said Francesco Pesole, FX Strategist at ING, in a research note.
EUR/USD traded 0.1% higher at 1.1346, despite the generally positive dollar move.
Elsewhere, the Polish central bank holds a meeting later Tuesday, but is not expected to change its reference rate so soon after the presidential election.
EUR/PLN traded 0.1% higher at 4.4907.