US Dollar Index Tops 94.00 As Volatility, COVID-19 Lift Greenback

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The US dollar has been enjoying a resurgence as of late, climbing to its best level in eight weeks. Investors are pouring into the greenback again amid financial market volatility and a rising trend in new COVID-19 cases. With the Federal Reserve seemingly hitting peak stimulus and the US government at a standstill over fiscal stimulus, traders are seeking shelter in the traditional safe-haven asset.

Earlier this month, the number of new coronavirus infections fell to the lowest level since June, leading to many analysts thinking the US has gotten a hold on the virus outbreak. However, since then, new confirmed cases have been steadily rising again, reaching close to 50,000 infections.

With 200,000 Americans dead, more than half of states are reporting more new coronavirus cases. As the country approaches the upcoming cold and flu season, there is plenty of uncertainty over the next few months.

New economic data suggest that the overall recovery is progressing slowly. The IHS Markit manufacturing purchasing managers’ index (PMI) rose to 53.5 in September, up from 53.1 in August. The composite PMI dipped to 54.4 this month, down from 54.6 in August. The services PMI also slipped from 55 to 54.6.

Mortgage applications advanced 6.8% in the week ending September 18, according to the Mortgage Bankers Association (MBA). The MBA’s 30-year mortgage rate edged up to 3.1%. The Federal Housing Finance Agency (FHFA) reported that the house price index rose by 1% in July. This comes one day after existing home sales jumped 2.4% last month.

Federal Reserve Bank, Washington, Dc, UsaInvestors have also been combing through multiple statements from Fed officials. Chicago Federal Reserve President Charles Evan suggested that the central bank could raise interest rates, while Fed Vice Chair Richard Clarida noted that policymakers “are not even going to begin thinking” about tightening policy until inflation reaches the 2% target rate. Also, Fed Chair Jerome Powell has delivered a dovish tone and a bleak assessment of the US economy, urging Congress to support the recovery with additional stimulus.

The US Dollar Index, which gauges the greenback against a basket of currencies, increased 0.24% to 94.22, from an opening of 93.99. The index has rallied to a two-month high, buoyed by the 1.35% increase over the last month. Year-to-date, the DXY has slipped 2.2%, up from the 4.1% slump.

The USD/CAD currency pair increased 0.46% to 1.3365, from an opening of 1.3303, at 15:48 GMT on Wednesday. The EUR/USD tumbled 0.3% to 1.1672, from an opening of 1.1710.

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