On Wednesday, the US Dollar Index (DXY) measured against a basket of six major currencies on an average was slumped to a nearly 11-week-low, as traders were heavily betting on prospects that the worst of pandemic-driven economic downturn might be over, eventually spurring up appetite for riskier assets such as euro and British Pound.
On top of that, a gauge of global stock indices had jumped on Wednesday, closing their gaps to an all-time closing high reached on February, as a raft of upbeat global economic data coupled with a growing optimism over the bloc’s gigantic stimulus package, had reduced the demand of safe-haven US Dollar, while investors seemed to be more interested to bet against the greenback and to sway away from the safe-haven assets to capitalize on recent market volatilities.
Improved global economic data ramps up risk-appetite, as king dollar drowns
Aside from that, as a slew of improved global economic data including a better-than-anticipated US private sector payroll in May alongside a crawling up of the United States’ service sector activities from an eleven-year low last month, appetite for riskier assets had accelerated significantly on Wednesday, as traders were found to be ditching out safe-haven assets likes of gold and US dollar.
Quoting statistics, on the day’s market closure, the US Dollar Index (DXY) measured against a bucket of six major currencies on an average fell by 0.32 per cent to 97.26 after dwindling to as low as 97.18, the index’s lowest level since March 12, however the greenback added 0.22 per cent against the safe-haven Japanese Yen to 108.98 per yen.
In tandem, the Australian dollar rose as much as 0.49 per cent to $0.6928 after reaching its five-month peak to $0.6983 on early Asia-Pacific trading hours, however, the Aussie currency pared earlier gains following reveal of remarks from the Aussie Treasurer that the country had entered into a recession for the first time since early 1990s.
Apart from that, the bloc’s single currency gained 0.65 per cent to $1.1242 on the day’s market round off after rising as high as $1.1251, its highest level in nearly three months, while the British Pound had also surged to a one-month peak against the greenback to $1.2573, though gains were capped amid a growing risks over Brexit headwind.
Meanwhile, forecasting further weakness for the US Dollar in a near-term outlook, which might follow a period of Dollar buying opportunity, Well Fargo analysts wrote in a report on Wednesday, “Momentum seems to be running the table right now.
We think the broad pullback in the U.S. dollar presents an attractive buying opportunity, but recognize there may still be room for additional weakness in the near-term. ”