Currencies Overview: US Dollar is Winning as Investor Confidence Has Been Shaken by Retail Trading

The dollar won and risk-sensitive currencies fell, after an attack on indebted stocks by hedge funds in the United States dampened investor confidence and boosted demand for safe-haven currencies.

Movements in the foreign exchange markets were moderate, as the dollar is still near trading levels it recorded in recent times, but buying the dollar confirms concerns about severe fluctuations in stock prices felt by various markets.

The dollar has benefited from the safety-seeking purchases since the start of the week, when investors were concerned that the fiscal spending package targeted by President Joe Biden would not be as large as the proposed 1.9 trillion dollars.

Distributions of a COVID-19 vaccine are in trouble around the world, which also reinforces investor concerns. Production delays have escalated into a row between the European Union and drugmakers over how best to direct the limited supplies available.

In early trading in London, the dollar index, which measures the performance of the US currency against a basket of currencies, rose 0.2% to 90.739. And the index is up half a percent for the week.

The euro fell 0.1% to $ 1.2107 before the German fourth-quarter GDP data.

The dollar gained 0.4% against the Japanese yen, to 104.64.

The Swiss franc, another currency that investors buy when they are anxious, has been little changed against the euro at 1.0771.

Risk sensitive currencies such as the Australian dollar fell. Most emerging market currencies also declined.

The Chinese yuan rose to 6.4695 yen per dollar in overseas market transactions.

The People’s Bank of China (central bank) pumped 100 billion yuan into the financial system today, after a week of liquidity cuts, which raised concerns that the central bank is in fact tightening monetary policy.