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LONDON (Reuters) – The dollar gained and risk-sensitive currencies fell on Friday after an assault on short positions in US hedge fund stocks shook investor confidence and boosted demand for safe-haven currencies .
Movements in the forex markets were measured with the dollar still remaining within recent trading ranges, but the dollar purchase highlighted concerns about wild swings in stock prices being felt in the markets.
The dollar has benefited from safe buying since the start of the week, when investors feared President Joe Biden’s tax expenditure program was not as big as the proposed $ 1.9 trillion.
Global COVID-19 vaccine deployments have also encountered problems, adding to investor nervousness. The delays in production have turned into a row between the European Union and drugmakers over how best to direct the limited supplies available.
“We could see the greenback retain some momentum over the weekend thanks to demand for safe-haven securities: further developments in Robinhood’s story will be closely watched in this direction,” said ING, referring to popular brokerage. to retail customers. hedge funds.
At the start of trading in London, the dollar index – which measures the dollar against a basket of currencies – rose 0.2% to 90.739. That’s up half a percent for the week.
The euro plunged 0.1% to $ 1.2107 ahead of German fourth-quarter GDP data due at 09:00 GMT.
The dollar gained 0.4% against the Japanese yen to 104.64.
The Swiss franc, another currency that investors often buy when they are nervous, moved little against the euro at 1.0771.
Risk-sensitive currencies like the Australian dollar have fallen. Most emerging market currencies also fell.
The Chinese yuan strengthened to 6.4695 yuan to the dollar in offshore markets.
The People’s Bank of China (PBOC) injected 100 billion yuan into the financial system on Friday after a week of reduced liquidity, which raised concerns about the tightening of monetary policy by the central bank.
Despite the dollar’s rise this week, most analysts are sticking to their calls: it will weaken in 2021 as the new US government implements massive budget spending while the Federal Reserve maintains its ultra-monetary policy. easy.
“The general trend reflects these supply issues around the US dollar,” said Michael McCarthy, chief strategist at CMC Markets in Sydney.
“The high expectations of this huge upcoming issue and the support of the Fed mean that we are looking for further weakness in the US dollar in the medium term.”
Additional reporting by Kevin Buckland in Tokyo, editing by Larry King
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