Dollar Edges Higher; Remains Near One-Week Low Ahead of Jackson Hole

By Peter Nurse

Investing.com — The dollar edged higher in early European trade Wednesday, but remained near a one-week low as confidence rises that the new surge in Covid-19 cases will have a limited impact on the global recovery.

At 2:50 AM ET (0650 GMT), the , which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 92.993, after falling as low as 92.804 on Tuesday for the first time since Aug. 17.

edged 0.1% lower to 1.1743, after climbing a one-week high of 1.1765 overnight, was up 0.1% at 109.70, fell 0.1% to 1.3720, and the risk sensitive dropped 0.2% to 0.7243, after climbing to 0.7271 on Tuesday, also a one-week high.

The dollar has been struggling over the last couple of days with optimism rising over the ability of the U.S. to cope with the recent surge in Covid-19 cases after the U.S. Food and Drug Administration granted to the vaccine developed by Pfizer (NYSE:) and BioNTech.

Additionally, the Meishan terminal at China’s second-busiest port reopened Wednesday following a two-week Covid-induced shutdown, increasing confidence that the world’s second largest economy has managed to control its coronavirus outbreak.

The main focus this week, though, has been the Federal Reserve’s , and with the Covid outbreak clouding the outlook, expectations have dropped that Fed Chair Jerome Powell will indicate a timeline for the tapering of the central bank’s massive bond-buying program.

“This week the pendulum has swung pro-risk, but we suspect investors will be reluctant to chase the dollar a lot lower before Jerome Powell’s speech this Friday,” said analysts at ING, in a note.

Elsewhere, rose 0.2% to 296.53 and climbed 0.1% to 348.14, with the Hungarian forint handed back some of Tuesday’s gains after the country’s central bank raised its benchmark interest rate by 30 basis points to 1.5%, the third such hike in as many months.

Hungarian policy makers have indicated they’ll keep up the tightening cycle until inflation is on track to hit the central bank’s 3% target over the monetary horizon.