By Peter Nurse
Investing.com – The dollar was largely unchanged in early European trade Friday, but the tone remains positive on worries the Covid-19 virus could stunt global growth just as the Federal Reserve starts to cut back its pandemic-era monetary stimulus.
At 2:50 AM ET (0650 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded flat at 93.558, after earlier Friday rising as high as 93.612 for the first time since early November. It’s on track to gain 1.1% this week, the most in two months.
was 0.1% higher at 1.1686, near the over 9-month low of 1.1665 reached overnight, was largely flat at 109.70, while fell 0.1% to 1.3624, not far off a new one-month low after a sharp 2.5% fall in U.K. in July, a signal that the country’s recovery may be losing momentum.
That said, the biggest losses against the dollar were reserved for the so-called commodity currencies. fell 0.3% to 0.7127, more than a 9-month low, over 3% lower this week, as a Covid-19 lockdown in Sydney was extended by a month.
dropped 0.3% to 0.6824, just above a new 9-month low, and almost 3% lower this week, with the country’s central bank delaying a rate hike earlier this week because of a snap lockdown over a fresh Covid-19 outbreak, which was extended earlier Friday.
rose 0.3% to 1.2870, a fresh six-month high, with the sudden drop in oil prices hurting the Canadian economy.
The spreading of the highly-transmissible delta variant of the Covid-19 virus is prompting concerns that the economic recovery from the first outbreak may be stalling. But, adding to this is the idea that the Federal Reserve, the central bank of the world’s largest economy and primary growth driver, is one the verge of easing its bond-buying stimulus.
“The mood-music from the Fed is very much one of a glide-path to tapering,” said analysts at ING, in a note, and “it looks like a lot of demand for the dollar is coming from investors pulling out of growth stories overseas.”
This means the market’s focus is now very much on the Fed’s annual symposium in Wyoming, which starts at the end of next week.
Elsewhere, traded 0.1% higher at 6.5015, just off the new three-week high of 6.5104 seen earlier and above the key 6.50 level, after the People’s Bank of China maintained its one-year loan prime rate at 3.85% and the five-year LPR at 4.65%.
While this move to keep its benchmark interest rates unchanged was widely expected, there had been some looking for a cut given the slowdown in growth at the world’s second largest economy after a spate of localized Covid-19 outbreaks that have resulted in extensive lockdowns.
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