TOKYO- The dollar hovered near a seven-week high on Tuesday, benefiting from a euro selloff overnight after coronavirus lockdowns choked consumer spending in Germany, and on short-covering in the over-crowded dollar-selling positions.
The euro sank the most in 2-1/2 weeks on Monday after data showed retail sales in Europe’s biggest economy plunged by more than forecast in December, with the continent still struggling with vaccine rollouts.
“When people think about selling euros, invariably you get some buying of dollars, because the euro-dollar exchange rate is easily the most liquid in the world,” said Commonwealth Bank of Australia currency analyst Joseph Capurso.
A buy back into the US currency was long overdue, some analysts said, with speculators’ net dollar selling near a 10-year peak.
Speculators have bet on a fall in the safe-haven US dollar as the Biden administration’s proposed 1.9 trillion stimulus has encouraged investors to put money in riskier assets, even as a group of Republican senators visited the White House to discuss a $618 billion alternative plan.
“Some hedge funds may be forced to unwind their dollar short positions after they got burned by recent short squeeze in some US shares,” said Yukio Ishizuki, senior strategist at Daiwa Securities.