SINGAPORE- The dollar clung to small gains on Tuesday as the greenback’s safe-haven appeal was burnished by worries about a second wave of COVID-19, which drove the steepest stock market selloff in a month and underpinned a bond rally.
The United States, Russia and France all hit new daily records for coronavirus infections and overnight the S&P 500 index fell 1.9 percent and Germany’s dropped 3.7 percent.
Moves in the currency market were more muted, though the dollar index lifted about 0.3 percent overnight and held there early in Asia trade while regional equities fell.
The largest gains for the greenback on Monday came against the, up 0.4 percent, which was hit by a drop in German business confidence, and a 0.7 percent rise on the Canadian dollar as oil prices slumped.
The yuan nursed a 0.5 percent loss as Sino-US tensions flared over arms sales to Taiwan.
“The dollar is broadly stronger, but not massively,” said National Australia Bank senior FX strategist Rodrigo Catril.
Structural forces, like low real yields, have held back further gains, he added, and so has a wait-and-see approach to the US election.
“I think many would probably remember the bad experiences we had going in to the Trump-Clinton election (in 2016),” said Catril.
“If you had a position on, you would have been whipsawed big time. I think the strategy this time is to travel light, and to choose the opportunity on the day rather than take on a very, very strong position going into the election.”