US dollar near 4½ month highs as risk appetite cools

London

THE US dollar held near a 4½ month high versus a basket of major currencies on Wednesday as simmering concerns about the global economy forced investors to seek safety in the greenback before the release of the Federal Reserve's July meeting minutes.

Sterling and the commodity-exposed Australian and Canadian dollars all hovered near recent lows against the dollar as the broad market mood remained cautious.

The dollar index held steady around 93.09, just below an early April high of 93.20 hit last week.

"The FX market is trading exactly as one would expect when growth worries are the dominant theme," said Marios Hadjikyriacos, a senior investment analyst at XM.

Even the New Zealand dollar, which briefly rose after the central bank set out a hawkish outlook for interest rates, swooned as a mild wave of risk aversion swept through markets.

The Kiwi was down 0.5 per cent at US$0.6888 in London trading, having risen earlier to US$0.6952 after the Reserve Bank of New Zealand said it would keep rates at 0.25 per cent, after the country was put into a snap Covid-19 lockdown.

A monthly fund manager survey by investment bank BOFA Securities showed that investors flipped to a net overweight on the dollar for the first time in nearly a year.

That shift in positioning was evident in more high frequency weekly data, as well as with hedge funds ramping up their net long bets on the greenback to the most since March 2020.

While the dollar failed to draw any sustained strength from Fed chair Jerome Powell's comments and mixed US data, markets shifted focus towards the annual Jackson Hole symposium next week where some expect the Fed to signal a change in direction with regards to its asset purchase plans.

US retail sales fell 1.1 per cent in July, more than economists expected, but industrial production numbers showed that output at US factories surged in July.

Elsewhere, the Canadian dollar hovered near a one-month low.

In cryptocurrencies, Bitcoin traded at US$45,244, not far from Aug 14's three-month high of US$48,190. Ether stood at US$3,042. REUTERS.