THE dollar hit a one-week high yesterday as investors fled to safe-haven assets following the release of weekly US jobless data which showed a record 22 million Americans have sought unemployment benefits in the last month, erasing nearly all job gains since the Great Recession.
The dollar index rose as high as 100.3 in morning trade, and was holding near those levels at the end of the North American session, last at 100.03, up 0.40% on the day.
The forced closure of businesses across the country, aimed at containing the coronavirus outbreak, has torpedoed the American economy. Initial claims for state unemployment benefits were at 5.25 million for the week ended April 11, down 1.37 million from the week prior, the government said.
The deepening economic slump was also amplified by other data yesterday showing manufacturing activity in the mid-Atlantic region plunged to levels last seen in 1980 and homebuilding tumbling by the most in 36 years in March. Dire US retail and factory data and a nosedive in oil prices to 18-year lows on Wednesday strengthened the dollar across the board.
While stabilising oil prices helped temper the dollar’s gains, the data outlook was dismal.
“The dollar has fared better this week as record weak data suggested a longer and more uncertain road to recovery, a dimmer outlook that’s revived appetite for haven assets,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
The greenback has gained broadly during the crisis as investors scramble for the safety of the world’s reserve currency, although it is down from its late-March highs since the US Federal Reserve unleashed a stream of measures to support the economy.
“We think we need a weaker dollar for risk sentiment. But as long as we have these fears and stresses out there, people will continue to flock to the dollar. I think it’s hard in the short term to see a big dollar move,” said Scott DiMaggio, co-head of fixed income at AllianceBernstein.
The euro resumed its drop versus the dollar, down 0.59% at US$1.084 as a half-trillion-euro compromise deal struck between euro zone governments last week to support countries through the coronavirus outbreak is widely seen as insufficient, especially for debt-laden Italy.
The yen weakened 0.23% against the dollar, as Japan extended a state of emergency beyond major cities to the entire nation.
The dollar rose against currencies considered riskier bets, edging up against the British pound and the Australian and New Zealand dollars. – April 17, 2020, Reuters
