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While moves in currency markets were much more contained than on
Thursday as equity markets stabilised, the risk-sensitive
Australian and New Zealand dollars fell sharply again.
The dollar index, which measures the currency against six
rivals, rose as high as 93.597 for the first time since early
November, before trading little changed at 93.629. For the week
it is on track 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 bullish flattening in the
US yield curve - typically representing a more pessimistic
re-assessment of growth prospects," ING currency analysts wrote
in a note.
"So 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 the 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 a new 9 1/2-month low of $0.7106,
down 0.5%, putting it on track for its worst weekly performance
since September 2020, as a COVID-19 lockdown on Sydney was
extended by a month.
New Zealand's kiwi dipped to a new nine-month trough of $0.6807.
The government on Friday extended a snap COVID-19 lockdown that
delayed the central bank raising interest rates this week.
The Canadian dollar dropped to an eight-month low of C$1.2949,
down 0.8% vs its U.S. counterpart as oil prices fell further
because of worries about the global economy.
Norway's crown dropped for a second day as weaker oil prices and
general nervousness among investors hit the currency despite the
Norwegian central bank on Thursday sticking to its plan for a
September interest rate hike. The euro was last up 0.7% at
10.625 crowns.
The euro was little changed at $1.1674, but still near the
9-1/2-month low of $1.16655 reached overnight. It is down nearly
1% this week, the most since mid-June.
"Equity market drawdowns and falling commodities mean one thing
and one thing only, a stronger USD as investors look for a safe
haven," said Jeremy Thomson-Cook, economist at payments firm
Equals Money.
The yen, another safe-haven currency, strengthened. The dollar
was down 0.2% at 127.96 yen.
Sterling slipped to one-month lows versus both the dollar and
the euro.
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 sank to a new three-week low of 6.51 per dollar
in the offshore market before trading about 0.1% weaker at
6.5052.
(Editing by Timothy Heritage and Raissa Kasolowsky)
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