Dollar holds near 10-week high against key rivals
▶ Some market players buy back riskier, emerging market currencies
The dollar edged higher against a basket of its key rivals on Monday, not far off a 10-week high hit after data showed that the US economic growth slowed less than expected and as global risk sentiment remained fragile.
The US currency has found support recently on safe-haven buying as investor demand for riskier assets waned on steep declines in world equity markets on worries over corporate earnings, geopolitical uncertainty and global growth.
“The development in the US equity market is the main focus in the foreign exchange market,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
On Monday, the dollar index, which measures the greenback’s performance against a basket of six major currencies, gained 0.1 percent to 96.446. The index has advanced 1.4 percent this month.
On Friday, it rose as high as 96.860, its best level since August 15, after data showed the US economy slowed less than expected in the third quarter. But it later turned and ended 0.3 percent lower on the day.
Trade tensions between China and the US, and a steady pace of rate increases by the Federal Reserve, have boosted the dollar, which serves as a safe haven in times of turmoil and economic stress.
A strong US economy has also underpinned the dollar, although some weak corporate earnings have started to stoke doubts about the growth outlook, especially amid rising borrowing costs.
The euro dipped 0.1 percent to $1.1395 even as German Chancellor Angela Merkel’s junior coalition partners gave her conservatives until next year to deliver more policy results.
The common currency has lost 1.8 percent this month on concerns over Italy’s freespending budget that would breach European Union fiscal rules.
Markets have been jittery and yields on Italy’s bonds have spiked since September as the EU disapproved of Rome’s budget plans.
Expert said some market players such as macro-focused hedge funds have started buying back riskier, emerging market currencies which were ravaged earlier this year.