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Dollar appears to remain dominant in currency markets

David Hobart

The US dollar appeared to remain dominant in the foreign exchange markets on Tuesday after the currency managed to reach new high points.

The greenback was up as trading got underway on Tuesday morning, marking a change for the currency in many pairs.

However, there are still severe concerns about the spread of the coronavirus and the effect that it might have on the global economy.

It was, for example, noted that liquidity was not readily available in the markets.

While the decisions of central banks to ease conditions also did not appear to have fully reduced fears.

One of the main fears now for the currency markets is that the sets of lockdown measures which have been implemented around the world could have severe knock-on effects.

It was revealed, for example, that Malaysia was set to head into lockdown.

In the UK, Prime Minister Boris Johnson called on citizens to avoid socialising in environments such as bars.

Many other countries have implemented similar measures.

Fears over China were also back in the spotlight, with the country – which was responsible for the first cases – reporting a new-found rise in numbers.

Traders flocked to the greenback in droves on Tuesday as a result of this new-found uncertainty.

The dollar index, which is a tool designed to track the performance of greenback in relation to several other major world currencies, was up by 0.3%.

It reached 98.444 at one stage – which brought it close to its recent surge position of 98.817.

The single European currency saw half a percentage point wiped off its value.

It was spotted at $1.1130 at one stage in its pair against the dollar.

One of the biggest upsets over the course of the day was the dollar’s gain of one whole percentage point against the Japanese yen.

The dollar reached 107 yen at one stage, which meant that many of the losses it acquired on Monday were neutralised.

This reflects what could in time transpire to be a paradigm shift for the forex markets.

While the Japanese yen has for years been perceived to be a safe haven currency because of its status as a global creditor, the greenback has proven it has the means to regular surpass it during times of crisis.

This means the dollar could even ultimately end up usurping the yen as a safe haven.

The British pound was also far down, perhaps as a result of the containment measures announced by Johnson over the course of the day.

It was down by 0.6% at one stage in its pair against the US dollar, reaching $1.2192.

There was also some consternation revealed among investors that the decisions of many central banks around the world – including the UK, Australia and Japan – could have caused more problems than answers.

There is a perception among some analysts that decisions to cut rates could be making no positive difference given that the coronavirus crisis is so all-encompassing.

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David Hobart
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