# Risk FX retreat catapults dollar to 3-month top as reflation doubts reemerge Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-07-19 Category: TRADING Category URL: https://financedigest.com/category/trading Meta Title: Global Markets React: Major Currencies Struggle Amid Meta Description: Stay updated on the latest currency movements amid rising COVID-19 cases. Discover how major currencies like the Australian dollar and British pound are faring URL: https://financedigest.com/risk-fx-retreat-catapults-dollar-to-3-month-top-as-reflation-doubts-reemergehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2021-07-19t022019z1lynxmpeh6i02drtroptp4usa-stocks-memes-alfi-1736838161851-compressed.jpg) By Ritvik Carvalho LONDON (Reuters) – Currencies such as the Australian dollar, the Canadian dollar, Norway’s crown and Britain’s pound took a beating on Monday, catapulting the U.S. [dollar to its highest in 3 months as a worldwide surge in coronavirus cases hit](https://www.financedigest.com/european-shares-hit-nine-month-high-dollar-wobbles-after-powell-remarks.html "European shares hit nine month high, dollar wobbles after Powell remarks") sentiment in global markets. The only major currency which did not cede ground to the dollar was the safe haven Japanese yen, which [gained 0.3% on the day to 109.74 yen to the dollar](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data"). With England lifting all [COVID-19 social](https://www.financedigest.com/stocks-with-greater-socially-responsible-investor-demand-saw-weaker-losses-during-the-covid-19-crash.html "Stocks with greater socially responsible investor demand saw weaker losses during the COVID-19 crash") restrictions on what some local media has dubbed “Freedom Day”, the continued spread of the highly contagious Delta variant of the coronavirus drew further doubt from investors about whether a total economic recovery to pre-pandemic levels is possible. Earlier this week, [British health minister](https://www.financedigest.com/british-doctors-strikes-risk-patient-safety-minister-says.html "British doctors’ strikes risk patient safety, minister says") Sajid Javid announced he had tested positive for COVID-19 and was in self-isolation, also forcing Prime Minister Boris Johnson and finance minister Rishi Sunak into quarantine. [Sterling hit a 3-month low against the dollar](https://www.financedigest.com/sterling-steadies-vs-dollar-ahead-of-boe-ecb-meetings.html "Sterling steadies vs dollar ahead of BoE, ECB meetings") of $1.3703. \[GBP/\] The [dollar benefited from the risk](https://www.financedigest.com/u-s-dollar-advances-vs-major-currencies-as-risk-appetite-fades.html "U.S. dollar advances vs major currencies as risk appetite fades") aversion in global markets, with the index that measures its strength against peer currencies hitting its highest since April 5. The greenback also benefited from the divergence in trans-Atlantic real yields. Germany’s 10-year inflation-linked bond yield fell to its lowest in nearly two years on Monday on concerns that the resurgent Delta COVID-19 variant would undermine economic recovery and weigh further on [euro zone inflation](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro"). We’re starting to see the FX markets catch-up to [bond](https://www.financedigest.com/britains-bond-market-turmoil.html "Britain’s bond market turmoil") markets, and more recently equity markets, in terms of fading reflation bets,” said Viraj Patel, FX and global macro strategist at Vanda Research. We think it’s wise to start taking chips off the table as risks of a policy mistake on both sides of the Atlantic are increasing ( [Fed tightening amid](https://www.financedigest.com/dollar-set-for-weekly-loss-amid-expectations-fed-will-slow-hikes.html "Dollar set for weekly loss amid expectations Fed will slow hikes") a growth moderation or Europe reopening amid Delta). The Aussie dollar, which hit its lowest since December 2020 during Asian hours, extended those [losses during morning trade in London](https://www.financedigest.com/lloyds-of-london-swings-to-2022-pre-tax-loss.html "Lloyd’s of London swings to 2022 pre-tax loss") to hit a low of $0.7363. It was down 0.6% on the day. The Canadian dollar, which dropped through its 200-day moving average in [Asian trade](https://www.financedigest.com/bny-mellon-joins-asian-development-banks-trade-finance-program.html "BNY Mellon joins Asian Development Bank’s Trade Finance Program"), fell past C$1.27 against its U.S. counterpart to C$1.2780, its lowest since Feb. 8. It was down 1.2% on the day. [“Despite rising](https://www.financedigest.com/soccer-european-revenues-rise-10-in-2020-21-despite-covid.html "Soccer-European revenues rise 10% in 2020-21 despite COVID") vaccination rates, a return to pre-corona normality seems questionable,” said Ulrich Leuchtmann, head of FX and commodity research at Commerzbank in a morning research note. If consumption and production were not to [return to 2019 levels](https://www.financedigest.com/delta-sees-return-to-profit-as-travel-demand-hits-historic-levels.html "Delta sees return to profit as travel demand hits ‘historic’ levels") Leuchtmann said, a significant chunk of productive capacities worldwide would “not just lie idle temporarily but would become devalued on a permanent basis. If we are no longer simply dealing with who will survive the corona period but about whose goods and services will remain in demand long term at all the [risk perception of the markets will rise](https://www.financedigest.com/ecb-governors-see-rising-risk-of-rate-hitting-2-to-curb-inflation-sources.html "ECB governors see rising risk of rate hitting 2% to curb inflation – sources"). It is hardly [surprising that the FX market](https://www.financedigest.com/marketmind-o-canada-markets-wary-of-fed-hawkish-surprise.html "Marketmind: O Canada! Markets wary of Fed hawkish surprise") cannot decouple from that. The euro dipped 0.3% to $1.1777. Investors will look to this week’s European [Central Bank meeting](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus"). Also taking a beating among European currencies was the Norwegian crown, which fell 1% to its lowest since November 2020 at 8.9320 [crowns per dollar](https://www.financedigest.com/dollar-edges-down-from-six-week-peak-swedish-crown-jumps.html "Dollar edges down from six-week peak, Swedish crown jumps"). (Reporting by Ritvik Carvalho; additional reporting by Tom Westbrook in Singapore and Saikat Chatterjee in London, Editing by William Maclean) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---