The US dollar has seen a sharp drop this week, as coronavirus infections in the States accelerate and hopes of a V-shaped recovery are paused.
The US dollar index (DXY), a benchmark that tracks the value of the dollar against a basket of foreign currencies, has dropped 1% since the beginning of the week, after closing yesterday’s session at 96.59.
However, the value of the index bounced back on Friday and it is now trading at 97.25 during early forex trading, up 0.68% from yesterday’s closing.
A surge in virus cases primarily concentrated in Florida, Texas, Arizona, and other states is hitting the Us economy, with daily cases reaching an all-time high of 40,184 on Thursday.
Texas Governor Greg Abbott has decided to temporarily halt the state’s reopening efforts, a measure that has investors concerned as other states may follow through, even though the market considers the possibility of another wave of lockdowns as very unlikely.
The euro has capitalized most of the decline so far this week, with the European currency gaining 0.39% since Monday and virtually unchanged as of this morning, trading at around 1.1218 euros per dollar.
Chris Turner, global head of markets for ING, said: “What we have seen in the last 4-6 weeks has been a big turnaround on the euro’s sentiment and this will be very supportive for the currency depending on the progress on the EU recovery fund”.
Meanwhile, the next few days will be crucial for the value of the North American currency, as the number of deaths resulting from this increase in virus cases will likely determine the markets’ direction in the days to come.