Risk back on: dollar heads off top spot

David Hobart

The US dollar continued what seemed to be a slow and steady decline on Tuesday and into Wednesday as the global forex markets appeared to accept the return of risk.

The move was largely triggered by the latest insights into China’s trade balance, which was much more positive than expected.

Economists and others had been predicting a decline in export levels of about 14% across the month of March.

When the latest export figures were finally released, it was revealed that they had actually gone down by just 6.6% compared to the previous year.

In terms of imports, this metric went down by under 1%.

It had previously been predicted that there would be a drop of close to 10%.

These figures suggest that while the coronavirus pandemic has wreaked havoc on the global economy and in particular on China, where the outbreak began, there is also some evidence to suggest that the return of normality could be on the way.

There was other good news from around the world too.

In the US, figures revealed that daily deaths caused by coronavirus have gone down.

President Donald Trump announced on Tuesday that he was almost at the stage where he could confirm that the shutdown would begin to come to an end.

Trump is understood to be ready to get in touch with state governors across the US federal system in order to arrange with them how to bring their local economies back to life.

The main consequence of this apparent shift towards optimism in the forex markets was that the US dollar, which has recently managed to attract a good deal of investment due to its much-desired high liquidity in a time of risk, lost its top spot.

Traders instead appeared to be willing to opt for other currencies instead.

Some of the currencies which rose, like the Swiss franc, were perhaps expected to go up due to the so-called “safe haven” status which these currencies enjoy.

The dollar was close to a fortnightly low of 0.9597 in that particular pair.

Against the Japanese yen, the greenback was down by 0.16% to 107.05 yen.

It also went down in pairs like its one with the single European currency.

It was down to $1.0994 for every euro at one stage.

There was some positive news for the dollar, however.

In its pair against the British pound, for example, the greenback went up to $1.2588.

The dollar’s sudden twist in fortunes follows a period in which the currency has been in high demand.

It is considered a very liquid currency, which stood it in good stead during a period in which people across the globe wanted to cash in various assets in order to continue to service debts and make payments in the face of coronavirus-related income drops.

Now, however, it appears that may not continue to hold as positive signs begin to emerge.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

David Hobart
Between 74-89% of CFD traders lose Between 74-89 % of retail investor accounts lose money when trading CFDs
  • Low trading costs
  • Great market flow
  • Research and analysis which helps spot trades
  • Wide range of Copy and Social Trading options
  • Limited range of non-forex markets
Your capital is at risk Europe* CFDs ar...
  • Multi-asset broker offering a wide variety of markets
  • Strong regulatory framework
  • Innovative risk management tools
  • Choice of market-leading platforms
  • Wide spreads on some markets
  • Expiry date on Demo Accounts
eToro Logo77% of CFD traders lose 77 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
  • Social and Copy Trading Platform
  • Beginner Friendly
  • Risk-free Demo Account
  • Top-tier regulation
  • Limited means of raising queries
  • Withdrawal process isn’t really ‘client-focused’
Blackbull LogoYour capital is at risk
  • User-friendly platform with great trade-analysis tools
  • Leverage Up To 1:500
  • Spreads as low as 0.00 pips
  • Quality trade execution thanks to high-spec IT infrastructure
  • $0 minimum account opening balance
  • 26,000 tradeable instruments
  • Not available in all jurisdictions
  • Regulatory infrastructure
XM LogoYour capital is at risk
  • Low minimum deposit
  • Super- tight bid-offer spreads
  • Impressive trading platforms
  • Tier-1 regulators
  • Difficult to contact tech support
  • No Crypto