U.S dollar gains strength, global geopolitical climate worsens

The American dollar closed on a bullish note at the end of Friday’s trading session, gaining 0.07% against a basket of major currencies to close at 97.460.

Stephen Innes, Chief Global Market Strategist at AxiCorp, in an email sent to Nairametrics, spoke about the worsening geopolitical climate around the world with the resurgence of COVID-19 cases. He said:

“The transmission from the incredible policy support offered up by central banks and governments alike to the real economy will be dotted with potholes but the resurgence of Covid-19 has transformed those potholes into craters.”

Why tracking the U.S dollar Index helps: Individuals hoping to meet foreign exchange payment obligations, and process transactions via the dollar to countries like England, France, or Japan, will need to pay fewer dollars for such transactions.

The American Dollar Index tracks the dollar’s strength relatively against a bouquet of other major currencies around the world, such as Japanese yen, Euro, British pounds sterling, Swedish krona, Canadian dollar, Swiss Franc, etc.

COVID-19 cases across America rose to at least 39,818 on Thursday, the largest one-day increase of the COVID-19 pandemic recorded, with Texas, America’s energy powerhouse, becoming the new hot spot for the pandemic.

There’s an inverse correlation between the risk sentiment and the dollar,” Erik Bregar, head of FX strategy, at Exchange Bank of Canada said in a note to Reuters. “Whenever we get headlines that hurt risk sentiment that helps the dollar,” Erik Bregar added.

The American dollar continues to attract global investors and currency traders in the wake of renewed market uncertainty, however, it’s very likely that any rebound seems to be a good selling opportunity.

It is true that the dollar is once again benefiting from fears of a second wave of the Covid-19 pandemic, but so far these concerns have not been sufficient to trigger an aggressive return to the greenback,” Unicredit FX strategist, Roberto Mialich, said.


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