The dollar weakened to a two-year low on Monday as strong increases in US coronavirus cases and outbreaks worldwide weighed on investor confidence.
The dollar index, which measures the currency against a basket of trading pairs, fell 0.7 percent to its lowest level since June 2018, as fears rise that the continued spread of Covid-19 in the United States United will hinder economic recovery.
The poor performance of the US currency has supported a rebound in gold prices to their all-time high, which rose as much as 2.2 percent on Monday to a record $ 1,944.71 per troy ounce.
“What has changed in recent days is that not only gold has risen against the dollar, but almost everything,” said Kit Juckes, currency strategist at Société Générale.
The Japanese yen, another perceived refuge, strengthened 0.8 percent to a four-month high of ¥ 105.30 per dollar. The pound rose 0.8 percent to $ 1.2848 and the euro gained 0.5 percent to $ 1.1745. The euro, which is the largest weight in the dollar index, has not traded above $ 1.17 since the end of September 2018.
“That is partly due to the feeling that the United States is having a harder time controlling the virus than others, which will cause the United States economy to underperform,” added Juckes.
Florida overtook New York on Sunday as the state with the second-highest number of confirmed infections, behind only California, as deaths in some of the most populous states in the United States have followed the increase in cases.
S&P 500-linked futures rose 0.5 percent on Monday, pointing to the benchmark US equities index opening higher as trading begins on Wall Street after falling at both. previous sessions.
European equity markets held steady in the morning trading, with the Stoxx regional benchmark index canceling early losses to gain 0.1 percent and London’s FTSE 100 down 0.1 percent, overwhelmed by significant losses. for airlines after the UK warned of travel to Spain.
“This weekend perhaps we were able to glimpse how challenging life will be this winter without a vaccine,” Deutsche Bank strategist Jim Reid said, noting the increase in the number of cases in the United States and parts of Europe and Asia.
Spain has faced a sharp increase in cases in three regions, and Germany also reported an increase. The situation has continued to deteriorate in Latin America, while Asia, Hong Kong and the Australian state of Victoria have also seen a significant increase.
The dollar’s weakness came before Republicans revealed their proposals for a new round of stimulus on Monday. Existing benefits, approved at the start of the coronavirus crisis in March, will expire at the end of the month and economists fear the withdrawal or reduction of the stimulus at a tense moment for the world’s largest economy.
Traders are also expecting a meeting of U.S. Federal Reserve rate issuers on Wednesday and the release of U.S. second-quarter gross domestic product figures on Thursday. Expectations are that the central bank will keep interest rates close to zero.
Tension between the United States and China increased over the weekend over the arrest of a Chinese investigator who, according to US authorities, had hidden in the country’s consulate in San Francisco. Washington has alleged that the investigator is a member of the Chinese military.
Qi Gao, a currency strategist at Scotiabank, said the closings of consulates in Houston and Chengdu last week had fueled the tension to the point that it weighed on the US currency. “In the coming weeks, you will see the dollar weaken further,” she added.
Asian stock markets were mixed. China’s CSI 300 index of stocks listed in Shanghai and Shenzhen added 0.5 percent, while Hong Kong’s Hang Seng fell 0.4 percent.
