The dollar’s worst week comes to an end

David Hobart

The worst week since October for the US dollar is now on its way to an end after the currency suffered several days of problems with trade and economic data releases.

The greenback has lost four-fifths of a percentage point worth of value in its pair with the single European currency over the course of this week alone.

It was seen at $1.1106 at one stage on Friday.

The dollar has been dragged down by perceptions that economic growth in the country may be coming to a standstill.

One release this week suggested that private firms were hiring less, while another appeared to hint that the manufacturing sector in the country was at risk.

Next week, the Federal Reserve will meet for the final time in 2019 – meaning that US monetary policy could well be in the spotlight.

On top of that, the country continues to be locked in a bitter trade war with China.

Despite the fact that a phase one deal was supposed to be signed at some point this month, it still has not been – leading to paralysis for the markets.

On Thursday night, US President Donald Trump said that discussions between the two sides were “moving right along”, although there was no concrete evidence of progress.

Elsewhere, other currencies stepped forwards to mop up the value left behind by the declining dollar.

The safe haven currencies, which include the Japanese yen and the Swiss franc, were there to take on investment from traders worried about the effects on global trade.

The yen was spotted at 108.68 at one stage in its pair against the US dollar.

The US dollar index, which is an artificial tool designed to track the greenback against six other currencies from across the globe, has gone down each day this week.

Overall, it has lost around 1% in just a few days – a development sure to spook many dollar traders.

However, the main winners were the British pound and the New Zealand dollar.

In the UK, opinion polls continue to indicate that Boris Johnson’s governing Conservative Party will be able to form a majority government once the general election takes place next Thursday.

From the perspective of the markets, this is likely to mean a swifter end to the Brexit saga – which is a key concern for forex traders.

It was spotted at 84.28 pence in its pair with the euro on Friday, meaning that it was at a two and a half year high point.

In its pair with the dollar, it has gone up by well over 1.5% over just this week alone.

It was seen at $1.3154 at one point.

The other big winner in the pair was the New Zealand dollar, which reached close to its highest point for four months on Thursday.

This was seen at $0.6559 thanks to a range of positive economic indicators – which have led the markets to believe that the chances of an easing to monetary policy in early 2020 is now highly unlikely.

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David Hobart
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