Dollar gains as risk appetite subsides

The dollar bounced on Wednesday after two consecutive days of losses as markets pin hopes for a fast economic recovery.

The dollar index rose 0.2% as the appetite for risk currencies wore off in early European trade. The pound fell 0.3% and the euro 0.2%. 

The kiwi lost almost 1% after the Reserve Bank of New Zealand stated that economic risks remained and additional stimulus may be imposed if necessary.

Analysts said that caution was normal due to the risks of a second coronavirus wave, despite improving economic data. 

Despite the losses, the dollar index is still up over 0.9% this week, with U.S., U.K., and euro zone data lifting risk currencies. 

The International Monetary Fund will report its revised global growth projections on Wednesday. This data is expected by investors to assess the extent of the economic damage and the pace of recovery amid the pandemic.