FX.co ★ COVID-19 plays into the hands of the US dollar, which is again becoming more expensive

The US dollar rose on Wednesday from yesterday's seven-week low. Excellent service to the US currency is provided by the raging COVID-19 virus in some countries, contributing to the decline in stock indicators and risk sentiment among market participants. So, India reported an enormous daily death toll from COVID-19 – 1,761 people. Simultaneously, Canada and the United States extended the deadline for closing land borders for non-essential travelers.

In March, the dollar experienced a reasonably strong rally, but in April, the quotes fell by more than 2%. Market participants hoped that the rapid rollout of the vaccination process worldwide would support the global economy and boost demand for currencies such as the euro or the Australian dollar.

Today, the dollar exchange rate against its six main counterparts in London trading rose by 0.13%, to the level of 91.33, and this is after a significant drop on Tuesday (to 90.856).

Moreover, positive data on the United States may well push the US currency quotes up even more. The jump in vaccination rates seen worldwide in recent months is fueling demand for US treasury bonds, which are becoming a hedge against the crisis for investors. To date, the approximate yield of 10-year treasury bonds is observed near the level of 1.58%, that is, almost at the minimum levels of mid-March.

The single European currency suffered more from the dollar's rise today, falling by 0.23% to $ 1.2010 in London trading. Recall that the night before, the euro reached a seven-week high of $ 1.2079. Admittedly, in recent weeks, the euro's optimism has increased as the dollar has weakened, but we should expect the exact opposite in the coming days. There is a high probability that the euro will decline sharply against the background of the US economic indicators that are ahead of the eurozone, including the revision of the European Central bank's rates. According to ABN Amro economist Georgette Boele, the euro will fall to $ 1.15 by the end of this year.

The decline in government bond yields and the US currency in April means that the Fed will be much slower to tighten monetary policy than previously expected.