U.S. dollar hits 9 - month high as fears over global economic recovery


LONDON, Aug 20 - The U.S. Dollar hit a new nine-month high against major peers on Friday, buoyed by fears that the Delta Coronavirus variant could delay global economic recovery just as central banks begin to reverse pandemic stimulus.

Although moves in the stock market were much more contained than on Thursday as the equity markets stabilised, the risk-sensitive Australian and New Zealand dollars fell sharply again.

The dollar index, which measures the currency against six rivals, has moved as high as 93.597 for the first time since early November, before trading declined to 93.535. For the week, it is on course to gain about 1%, the most in two months.

Trade-weighted measures of the dollar are pushing to new highs for the year. This comes at a time of pessimistic flattening in US yield curve - typically representing a more bullish re-assessment of growth prospects, ING currency analysts wrote in a note.

Even though the mood-music from the Fed is very much one of a glide-path to tapering, it looks like a lot of demand for the dollar is coming from investors pulling out of growth stories overseas.

Minutes of Fed's July meeting, released on Wednesday, showed officials largely expect to reduce their monthly bond buying later this year.

The Australian dollar sank to the lowest of $0.7115 during a new 9 1 2 - month period, down 0.4%, putting it on track for its worst weekly performance since September 2020 as a COVID lockdown on Sydney was extended by a month.

New Zealand's kiwi dipped below a new nine-month low of $0.6808. The central bank extended a short COVID lockdown on Friday that delayed the government from raising rates further this week.

The Canadian currency dropped to a new six-month low of C $1.2832 amid a fall in oil prices triggered by worries about the global economy.

Risk aversion in the air has buoyed the greenback, with pro-growth currencies bearing the brunt of it, Rodrigo Catril, a strategist at National Australia Bank, wrote in a client note.

The euro rose 0.1% to $1.1682, but remained near the 9 months low of $1.16655 reached overnight by other investors. It is down nearly 1% this week, the largest since mid-June.

The dollar, another safe-haven currency, fell slightly compared to the yen 109.69.

Sterling dropped to lows against the dollar and euro in one month.

Emerging markets have also had a bruising week. A regulatory crackdown in China and the concerns over growth and COVID - 19 have sent investors looking for safer assets.

The Chinese yuan was below a new low of 6.51 per dollar in the offshore market, before sank on the 6.505 trade.