U.S dollar records gains as FX traders turn to the safe-haven currency

Money

Friday August 6,2020

The American dollar gained against major currencies at London’s trading session on Friday morning. The American Dollar Index, which tracks the U.S dollar against a basket of other major currencies, gained 0.27% to trade at 93.025 at the time this report was drafted.

Quick fact: The U.S. Dollar Index tracks the American dollar against other major currencies such as the Japanese yen, British pound sterling, Swedish Krona, the Euro, and more. Individuals hoping to meet foreign exchange payment obligations, via dollar transactions to European countries, and Japan, would need to pay fewer dollars in meeting such obligations.

Why the U.S Dollar is presently up

Bullish sentiment is now on the greenback due to a combination of rising U.S. Coronavirus cases, a rise in U.S Treasury yields, and the fact that a new stimulus package deal from the U.S Congress won’t be available in the short term.

The Chief Global Market Strategist at AxiCorp, Stephen Innes, in a note to Nairametrics, explained why currency traders are increasingly bearish in the mid-term on the U.S dollar. He said:

“In these baffling pretzel logic confusing times, FX traders will follow one train of reasoning as the dollar will continue to revert to its counter cycle trend, the buck turns sour when the goings are good, and the buck turns sweet when the goings are bad.

“But this gnawing FX toothache means I still think that view seems far too quaint in its simplicity as at some point growth differentials and the data will count.

Low yields forever are the ultimate invitation to strap on risk as consensus works off the theme “do not fight the Fed.” Equities, even at these elevated levels, continue to climb the ladder; gold similarly continues to power ahead; the USD is on a clear-cut weakening trend.”

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