Dollar rises as pandemic concerns spark flight to safety

New York

THE dollar rose on Friday as investors sought safe havens after Austria said that it would be the first country in Western Europe to reimpose a full lockdown amid surging Covid-19 infections and Germany said it could follow suit, sending the euro lower.

The dollar index, which tracks the greenback against a basket of six major currencies, was up 0.489 per cent at 96.029, close to the 16-month high of 96.266 hit on Wednesday.

For the week, the dollar was up around 1 per cent.

The euro, meanwhile, which has been on its back foot all week, hit a 16-month low amid the Covid surge in Europe and as expectations have grown that interest rates will be hiked faster elsewhere, particularly in the United States.

Federal Reserve governor Christopher Waller said the US central bank should speed up the pace of tapering its bond purchases to give more leeway to raise interest rates from their near-zero level sooner than it currently expects if high inflation and the strength of job gains persists.

Commodity-linked currencies, such as the Australian, New Zealand and Canadian dollars, often seen as risky, all declined.

The euro has fallen more than 1 per cent last week versus the dollar and was down 0.74 per cent on the day at US$1.12895, having earlier touched US$1.1248, its weakest level since July 2020.

European Central Bank (ECB) president Christine Lagarde doubled down on her cautious position on Friday, saying that the ECB should not tighten policy as that could undermine recovery.

The Aussie was down 0.58 per cent at US$0.72335 and the Kiwi was 0.72 per cent lower at US$0.69945.

The Canadian dollar slid 0.42 per cent to 1.2652.

The Japanese yen, also considered a safe-haven currency, strengthened following Austria's lockdown announcement, and was up 0.22 per cent versus the dollar at 113.99 yen.

Sterling shed some of its recent gains and was down 0.39 per cent at around US$1.3448. BLOOMBERG