HONG KONG Reuters -- The dollar went to around a two-year high against the euro and an 18 month high against the pound as investors scrambling for safety after fears that China's COVID 19 lockdowns and aggressive U.S. rate hikes could lead to a two-year high against the euro and an 18 month high against the pound.
The People's Bank of China said late on Monday it would cut the amount of foreign exchange banks that must hold as reserves, but China's offshore currency was steady in early trading, at 6.5770 per dollar.
Fears about China's economic growth hurt the currency to recover from a year low of 6.609 per dollar on Monday.
The dollar index, which measures the greenback against six main peers, was at 101.58 after jumping 0.58% on Monday and hitting a two-year peak of 101.86.
It has gained 3.3% 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.
A mass-testing campaign will expand China's financial hub of Shanghai from the city's most populous district to another 10 districts and one economic development area, according to a Beijing official late on Monday.
Hawkish comments made by various policymakers last week have raised the risks of interest rate policy tightening by global central banks. The U.S. Federal Reserve said that it expects to raise rates by a half point at each of its next two meetings. FEDWATCH As well as driving investors to the dollar, these fears have caused equity markets to sell heavily and U.S. Treasury yields to fall. MKTS GLOB The euro was at $1.0723 a fraction above its overnight low of $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. Since October 2019, funds have amassed their biggest bet against the pound, a bet worth close to $5 billion, according to U.S. futures market data.
The Australian dollar was at $0.7177 when it hit a two-month low overnight, suffering particularly because of the China lockdowns that have weighed on commodity prices.
The dollar fell by 0.4% compared to the yen to 127.62. The Japanese currency has managed a very slight recovery this week from last week's 20 year low of 129.40.
The price of ether was $3,000.Bitcoin was a little firmer at $40,500.
Researchers at B 2 C 2 said that coin market trading is currently closely correlated with equity markets and there is no theme so far to override weakness from rates growth inflation war concerns.