Flight to quality lifts U.S. dollar to two-year highs; Aussie crumbles

FILE PHOTO: U.S. greenback banknotes are displayed on this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/Illustration

LONDON (Reuters) – The U.S. greenback climbed to a two-year excessive versus its rivals on Monday and was on observe for its single largest every day acquire in additional than six weeks as a wave of threat aversion swept by way of international markets, boosting the buck’s secure haven attraction.

With warfare in Ukraine coming into a 3rd month and the lockdown of 25 million folks in Shanghai about to enter a second month, investor sentiment was fragile amid worries that climbs in client costs will result in speedy international rate of interest rises.

Towards a basket of its rivals, the greenback gained 0.6% in early London buying and selling to 101.62, a degree it final examined in March 2020 and on observe for its largest every day rise since March 11.

“The week is beginning with a firmly detrimental tone in international markets, that are discounting a mixture of a) many central banks accelerating their tightening plans, b) Russia and Ukraine transferring additional away from a diplomatic answer, c) China’s Covid disaster which is forcing a re-rating of development expectations within the area,” ING strategists stated in a observe.

The euro’s tiny features after information of French President Emmanuel Macron’s comfy election victory over far-right rival Marine Le Pen rapidly dissipated, with the one forex down 0.8% at $1.0729.

Commodity currencies have been singled out for particular punishment because the greenback soared, with the Australian greenback and the New Zealand greenback main losers.

The Aussie, which was one of many largest gainers in currencies within the first quarter of 2022 due to surging commodity costs, fell extensively. It weakened greater than 1% in opposition to the U.S. greenback and fell by the same margin versus the Swiss franc.

Hawkish feedback by varied policymakers final week additionally raised the dangers of aggressive coverage tightening by international central banks. Cash markets anticipate the Fed to lift rates of interest by a half level on the subsequent two conferences and the European Central Financial institution to lift rates of interest by 25 bps in July.

China’s yuan fell to a one-year low, extending losses after posting its worst week since 2015, as traders fret concerning the worsening financial development outlook on account of strict COVID-19 measures and lockdowns throughout the nation.

Reporting by Saikat Chatterjee; Modifying by Catherine Evans

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