Dollar hits two-month highs as second coronavirus wave threatens U.S. economies

The dollar hit a two-month high on Thursday as concern over Europe’s and the United States’ resilience to economically recover from the coronavirus pandemic grew. 

The dollar benefited from another surge in European coronavirus cases as it boosted a safe-haven bid. Meanwhile, Federal Reserve policymakers encouraged the U.S. government to release more fiscal stimulus, prompting a sell-off of risky assets.

The dollar index rose 0.1% to a two-month high of 94.50. It is up 2% so far this week as economic momentum begins to fade.

Risk appetite soured after data on U.S. business activity showed a slowdown in September and restrictions were reinforced in Europe to combat another surge of infections.

Investors are closely monitoring the Aussie and the kiwi, which fell under pressure on expectations that their central banks could launch new monetary stimulus. A drop in commodity prices is expected to increase downside for the two currencies.

The Aussie slid 0.45% to $0.7042, near its weakest since end-July.

Fed Vice Chair Richard Clarida said on Wednesday that the U.S. economy is struggling amid unemployment and weak demand. He added that policymakers are not considering raising interest rates until inflation hits 2%.

Other safe havens, including the Japanese yen and the Swiss franc, also firmed.

The British pound held above $1.27 ahead of an announcement of Britain’s plans to protect jobs and employment later in the day.