The United States of America dollar on Wednesday, June 20i, hit a 11-month high against a basket of its rivals as an escalating trade conflict kept investors from buying higher-yielding currencies and markets braced for growing volatility.
On Wednesday, the dollar edged 0.1 percent higher against a basket of its rivals at 95.30, its highest since mid-July 2017.
Currency markets had breathed a sigh of relief after Beijing signalled its tolerance of a stronger currency by fixing a stronger daily midpoint than expected. Safe-haven currencies such as the Swiss franc and the Japanese yen were still well-supported, though.
“Market volatility remains very low and the headline risks from trade concerns should push that higher,” said Hans Redeker, global head of currency strategy at Morgan Stanley in London.
Led by the U.S. Federal Reserve, global central banks are pulling back from their financial-crisis policies, and market expectations are for volatility to pick up.
Morgan Stanley estimates that FX volatility remains one standard deviation below its long-term average. U.S. bond market volatility was more than 1.5 standard deviations below its long- term average.
A gauge of perceived equity market swings rose to a two-week high of 14.64 vol on Tuesday before pulling back.
The Australian dollar, considered sensitive to shifts in sentiment towards China, fell to a 13-month low of $0.7347 on Tuesday before pulling back slightly to $0.7391.
The Swiss franc slipped 0.1 percent to 0.9953 franc per dollar, handing back the previous day’s gains.
