The Unted States of Amerca dollar hit a two-week high against a basket of major currencies on Thursday, February 8, with investors flocking to the relative safety of the greenback as European share prices fell back again after a modest recovery the previous day.
A selloff across global stock markets and bets that the United States could see at least three interest rate hikes in 2018 have driven the dollar up in recent days, with the currency gaining more than 2 percent against its basket over the past week.
Traditional safe havens such as the yen and Swiss franc have seen only modest gains during the recent stock market volatility, and indeed the dollar was up against both on Thursday JPY= CHF=.
“Everyone knew that the stock market was due a correction so there’s no sense of panic, and that dampens demand for safe havens,” said Reichelt.
Higher U.S. yields also underpinned the greenback.
“Yesterday, U.S. Treasury yields rose, so generally speaking, that has led to dollar strength,” said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.
The yield on benchmark 10-year Treasury notes US10T=RR stood at 2.824 percent, compared with its U.S. close of 2.843 percent on Wednesday.
The benchmark yield rose as high as 2.885 percent on Monday, its highest since January 2014, after stronger inflation data led investors to fear that the Federal Reserve may raise rates more often than previously expected.
The dollar’s rebound is unlikely to be sustainable, according to a Reuters poll of strategists published on Thursday.
The New Zealand dollar was the biggest mover among developed-market currencies, skidding as much as 0.6 percent to four-week lows of $0.7192 against its U.S. counterpart after the Reserve Bank of New Zealand kept interest rates steady at a record low.
It said volatility in equity markets this week was a warning that global markets were nervous about the risk of higher inflation and rising interest rates.