The dollar rose to around a two-year high against the euro and an 18 month high against the pound as investors scrambled for safety after fears about the economic impact of China's COVID 19 lockdowns and US rate hikes.
China's offshore currency was steady in early trading at 6.5770 per dollar, as the People's Bank of China said late on Monday April 25 that it would reduce the amount of foreign exchange banks must hold as reserves.
The currency recovered from a year low of 6.609 per dollar on Monday, hurt by fears about China's economic growth.
The dollar index, which measures the dollar against six major peers, was at 101.58 on Monday after jumping 0.58 per cent and hitting a two-year peak of 101.86.
It has gained 3.3 per cent so far this month, which would be its largest month of gains since November 2015.
The upside of the dollar is a good bet. China's growth risks are rising as authorities pursue an aggressive COVID campaign, conditions around Ukraine remain volatile and 'Fedspeak' remains as hawkish as ever, said analysts at Westpac in a note.
China's financial hub has been under strict lock down to fight COVID 19 for around a month, and a Beijing official said late on Monday that a mass testing campaign will be expanded from the city's most populous district to another 10 districts and one economic development area.
There were comments made by various policymakers last week that raised the risks of interest rate policy tightening by global central banks. The US Federal Reserve is expected to raise rates by a half point at each of its next two meetings, and the most important of these are from the US Federal Reserve.
These fears have caused equity markets to sell off heavily and the US Treasury yields to fall, as well as driving investors to the dollar.
The euro was at $1.0723 a fraction over the overnight low of US $1.0697, its lowest since March 2020, as market nerves trumped any optimism from the re-election of French President Emmanuel Macron.
The pound was at $1.2744, its lowest since September 2020. US futures market data shows that funds have amassed their biggest bet against the pound since October 2019, a bet worth close to US $5 billion.
The Australian dollar was at US $0.7177, and hit a two-month low overnight, suffering particularly because the China lock downs have weighed on commodity prices.
The dollar fell by 0.4 per cent against the yen, to 127.62. The Japanese currency has a very slight rebound this week from its 20 year low of 129.40 last week.
The price of ether was at US $3,000.Bitcoin was a little firmer at US $40,500.
Researchers at B 2 C 2 said that cryptocurrencies market trading is currently correlated closely with equity markets and there is no theme so far to override weakness from rates growth inflation war concerns.