LONDON (Reuters) – The US dollar erased initial losses Monday as global bond sales intensified, adding to its secure appeal.
FILE PHOTO: an employee counts US dollar bills in a currency exchange office in central Cairo, Egypt on March 20, 2019. REUTERS / Mohamed Abd El Ghany / File Photo
A 9% dollar rally in the past two weeks ended on Friday after major central banks stepped up their dollar injection structures to cope with a global funding struggle.
But Monday’s trading resulted in a stock market crash, raising concern that central bank stocks were not enough.
“The upshot is that the banking system simply doesn’t have enough dollars to lend to anyone who wants to borrow them … For now, demand for the US dollar appears to be insatiable,” said Marshall Gittler, head of investment research. at the BDSwiss group.
Against a basket of other currencies = USD, the dollar rose 0.2% to 102.82 after falling to 0.7% previously, up nearly 1% from the Asian low. Friday reached its January 2017 high at 102.99.
Also fueling the rise in the dollar was a turnaround in dollar positions among hedge funds to a net short from an overall long bet, according to the latest positioning data. This has raised speculation that the dollar rally could be partly explained by a short hedge by traders.
Washington lawmakers were unable to approve U.S. stimulus measures on Sunday as Republicans and Democrats fought over a proposed $ 1 trillion spending package, fueling concern over dollar earnings, according to analysts that most part of the investors preferred to hold liquidity.
“We went from risk off to a phase where the main players are competing with each other for the security of holding dollars in cash,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo. “There are still many investors who need to sell riskier assets and want to hold their money in dollars.”
Against the JPY = EBS yen, the US currency rebounded between gains and losses. Last time it was trading 0.6% at 110.07. Against the Swiss franc CHF =, the dollar fell 0.2% to 0.98 francs, as the Swiss central bank maximized foreign exchange intervention after the Brexit referendum in 2016.
The dollar initially rose against the euro EUR = EBS to its highest since April 2017, so it reduced earnings by trading 0.2% less than $ 1.0636 per euro.
The dollar also closed on multi-year highs against Australian AUD = D3 and New Zealand NZD = D3 dollars as economic self-isolation costs triggered the largest intraday decline ever in New Zealand equities.
Reporting by Saikat Chatterjee; Additional Stanley White reports in Tokyo; editing by Larry King