Read for 4 minutes (Reuters) – NEW YORK (Reuters) – The dollar slipped from a three-month high against a basket of rivals on Thursday, with the euro benefiting as investors unwound risky currency bets and concerns over the spread of COVID variations fuelled demand for safe havens. PHOTO FROM THE FILE: During a picture opportunity at the Korea Exchange Bank’s headquarters in Seoul on April 28, 2010, an employee counts one hundred US dollar bills. Jo Yong-Hak/File Photo/REUTERS According to Marvin Loh, senior global markets strategist at State Street, the dollar was weaker against the euro, the Japanese yen, and the Swiss franc, which are all low-interest-rate, stable markets that speculators short and use the proceeds to acquire riskier assets. However, as bond yields rose and stock markets plummeted, riskier currency holdings were liquidated, helping the euro, as well as the yen and franc, which are also considered safe-haven currencies. “You have strength in those currencies when you have this kind of unwind,” Loh added. Following a strategy review, the European Central Bank set a new inflation target and claimed a responsibility in combating climate change, with the single currency last up 0.39 percent against the dollar, at 1.18365. The dollar was 0.71 percent weaker against the yen at 109.825, with the yen touching 109.535, its highest level since June 11, and the Swiss franc hitting 0.9134, its highest level since June 17. The dollar index, which compares the greenback to six other currencies, fell 0.297 percent to 92.493 on Thursday, after reaching 92.844 for the first time since April 5. (Graph based on global FX rates) tmsnrt.rs/2RBWI5E According to Mazen Issa, senior FX strategist at TD Securities, the global spread of COVID variations has added to fears of economic growth disappointment in the coming months. “While we are cautious in interpreting price movement at this time of year when liquidity is scarce,” he added, “we believe markets are anticipating a potential growth scare if the Delta variant spreads and infections rise.” Riskier currencies, such as the Australian and New Zealand dollars, fell, with the Australian dollar falling 0.78 percent to $0.7426, its lowest level since mid-December, and the Kiwi falling 1.08 percent to $0.6943. According to data released on Thursday, the number of Americans submitting new jobless claims increased unexpectedly last week, indicating that the labor market’s recovery from the COVID-19 outbreak is still turbulent. “It’s a signal that if these figures don’t improve, or if we don’t get closer to full employment, the Fed will have room to relax and not necessarily think about a tapering timeframe,” Juan Perez, senior currency trader at Tempus Inc, said of the report. While the economic recovery “was largely assessed as not having yet been reached,” Fed policymakers agreed they should be ready to intervene if inflation or other dangers arose, according to minutes released on Wednesday by the US Federal Reserve. According to a Reuters poll, the Fed is expected to disclose a strategy for tapering its asset purchases in August or September. While the majority of respondents believe the first cut to its bond-buying program would happen early next year, nearly a third believe it will happen in the fourth quarter of this year. John McCrank contributed reporting; Saikat Chatterjee contributed additional reporting; Kirsten Donovan, Lisa Shumaker, and Sonya Hepinstall edited the piece./n
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