US Dollar drops from 9-1/2-month high, but posts largest weekly gain in two months

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US Dollar drops from 9-1/2-month high, but posts largest weekly gain in two months

On Friday, the US Dollar Index (DXY) measured against a basket of six major currencies edged 0.1 per cent lower after hitting its highest level since early-November earlier in the session, as traders appeared to be engaged in a weekend buy-the-dip move with US Treasury bond notes rising higher, though, near-term outlook for most major and emerging market currencies remained downbeat as pandemic concerns would likely to add fresh impetus into the US Dollar’s safe-haven appeal amid rising Delta concerns.

On top of that, apart from worries that a worldwide rise in Delta cases would add to hindrances on a swift economic recovery, Central Banks’ across the globe would contemplate the possibilities of a near-term taper of fiscal supports for the economies in context of a strong build-up in price pressures in Jackson Holes meet of Central Bankers scheduled to take place between August 27-28, which is shifted to online on Sunday over concerns about a wary uptick in delta cases, eventually reinvigorating a safe-haven appeal for the greenback.

Nonetheless, wild swings in the FX market witnessed throughout the week, seemingly had calmed down on Friday, as equity markets bounced back, however, the Aussies and Kiwis, widely seen as a proxy for global trade sentiment, remained mostly mixed.

US Dollar inches lower, but posts 1.0 per cent in weekly gains

Citing statistics, on Friday’s FX market wind-down, the US Dollar Index (DXY) surged to a 9-1/2-month peak of 93.73 earlier in the session, however, closed out the day 0.1 per cent lower to 93.49.

On the week, the US Dollar Index gained 1 per cent, the strongest weekly rise in more than two months. Apart from that, the Australian Dollar was tanked to a 9-1/2-month low of $0.7107 against the greenback, while on the week, the Aussies were tottered as much as 3.3 per cent, the Australian currency’s worst weekly decline against its American peer since September 2020.

Besides, Kiwis shed 0.2 per cent to $0.6838 after dropping to a nine-month low to $0.6807 earlier in the day, while Canadian Dollar tumbled to an eight-month low of C$1.2948 against the greenback. However, against the bloc’s common currency euro, the American currency shed 0.2 per cent to $1.1697, but remained at a spitting distance to a 9-1/2 month high of $1.1665 reached a day earlier and the British Pound fell 0.1 per cent to a one-month low of $1.3622.

The safe-haven Japanese Yen ended mostly flatlined at 109.80 yen per American Dollar. Meanwhile, citing prospects of further upswings in the US Dollar, a senior markets economist at Capital Economics, Jonas Goltermann said, “In the near term, we expect the dollar to appreciate a bit further.

We think that robust growth in the U.S. relative to other major economies and a gradual tightening of monetary policy will put further upward pressure on the greenback”.