NEW YORK- The dollar rose along with other safe haven currencies as stocks fell and as upbeat US economic data helped reverse some of the losses from earlier this week when dovish remarks by the Federal Reserve tanked a month-long rally in the greenback.
The dollar index, which measures the greenback against a basket of six currencies, was 0.32 percent higher at 92.181 at 2:45 p.m. Eastern time. The index was still down 0.77 percent for the week, on pace for its worst weekly performance since the first week of May.
Friday’s gains for the US currency came as stocks fell following a glum earnings report by Amazon, growing concerns over the rapid spread of the COVID-19 Delta variant, and in the wake of a regulatory crackdown by China on its technology and education sectors.
“We’re at the end of the month and August tends to be the cruelest month for the financial markets on a seasonal basis, on a 10-year basis, it’s the weakest month,” said Kathy Lien, managing director at BK Asset Management.
“So with the Delta variant as well as the uncertainties around China, investors are getting nervous and I think they’re worried about a more durable correction in stocks and so you’re beginning to see the dollar catch a safe haven bid,” she said.
Japan’s yen and Norway’s krone, which are also seen as safehaven currencies, were up 0.26 percent and 1.27 percent respectively.
The dollar also got a lift after St. Louis Federal Reserve President James Bullard said the Fed should start reducing its $120 billion in monthly bond purchases this fall and cut them “fairly rapidly” so the program ends in the first months of 2022 to pave the way for a rate increase that year if needed.
The greenback slumped earlier this week after Fed Chair Jerome Powell said rate increases were “a ways away” and the job market still had “some ground to cover.”
“While the dollar suffered a notable setback this week, how significant it could prove may be gleaned by nonfarm payrolls next week,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
