U.S. dollar rises versus most currencies on new virus strain
The dollar gained against most currencies on Monday in a choppy, holiday-shortened week, as a fast-spreading new coronavirus strain prevalent in Britain prompted investors to seek safety in the greenback.
The dollar index hit a 10-day high earlier in the session, but then turned lower on the day. Analysts said volatile moves are typical of this time of year when volumes are thin.
Sterling fell to a 10-day low against the dollar and euro, as two-year British government bonds dropped to a record low. Prime Minister Boris Johnson sought an emergency response to the crisis.
The pandemic stress in Europe overshadowed a weekend deal among U.S. congressional leaders for a $900 billion coronavirus aid package.
In midday trading, the dollar index edged 0.1% lower to 90.226, after it sank to two-and-a-half-year lows last week, driven by optimism that vaccines would help to revive global growth.
Earlier in the session, it rose to a two-week high of 91.022. The euro fell 0.2% to $1.2234, after earlier dropping to a 10-day trough.
“Euro/dollar is suffering a pullback with broad risk sentiment...as the world digests what to make of this new strain of COVID-19, which is allegedly 70% more contagious, but we’ve noticed a couple waves of ‘buy-the-dip’ emerge in Europe today and we think this is because today’s pullback is a counter-trend,” said Erik Bregar, head of FX strategy, at Exchange Bank of Canada in Toronto.
The pound slumped 1.3% versus the dollar to $1.3340, while the euro gained 1% against sterling to 91.69 pence.
Unlike the pound, which faces structural challenges when Britain leaves the EU either with a deal or no deal, the euro’s strength isn’t expected to suffer structurally, said Holger Schmieding, chief economist at Berenberg.
He expects the euro to eventually resume its rise towards $1.25. Bitcoin fell nearly 3% after hitting a record high of $24,298.04 on Sunday. The virtual currency was last down at $22,759.
The riskier Australian and New Zealand dollars weakened at the start of the week as investors rushed for haven assets.
The U.S. dollar gained 0.1% against the yen to 103.43 yen.
10-year Treasury yield drops below 0.9% amid fears of new Covid strain
Treasury yields fell on Monday as fears over a new, more contagious strain of coronavirus sparked demand for the relative safety of government bonds.
Those fears were checked by a new, $900 billion Covid-19 relief package from Congress and longer-term optimism about the global vaccine rollout.
The yield on the benchmark 10-year Treasury note fell about 5 basis points to 0.905%. The rate hit a low of 0.882% earlier in the session, its lowest level since Dec. 11. Meanwhile, the yield on the 30-year Treasury bond dropped 6 basis points to 1.646%. Bond yields fall as their prices rise.
Reference: CNBC
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