Dollar at 2-year high, safe havens up on stormy global economy

NEW YORK: The dollar hit its highest level in two years and the yen rose half a percent on Thursday as economic and political uncertainties swept through Europe and Asia, pinning down the euro and the yuan.
Worries over German manufacturing, the impact of a trade war on Asian economies and deepening concerns over Brexit and European parliamentary elections have broadly curbed risk appetite and sent investors to perceived safe-haven assets.
“Safe havens were the currencies of choice as confidence in global growth faltered,” said Joseph Manimbo, senior market analyst at Western Union Business Solutions.
“The greenback and safer rivals from Japan and Switzerland were in the driver’s seat.”
While the United States is not without its own worries – namely trade conflict with China – investors see the greenback as a relative safe haven because of its preeminence in the global economy and the extra cushion of having some of the highest interest rates in the developed world.
The dollar hit a high of 98.371 against a basket of six major currencies, its highest since May 2017.
If it maintains its path, the dollar will be on track for a fourth consecutive month of gains.
“Certainly the dollar has been acting like something of a safe haven even though the Fed has been more dovish than has been expected,” said Neil Mellor, FX strategist at BNY Mellon.
Activity in Germany’s services and manufacturing sectors fell in May, a survey showed on Thursday, reflecting the toll that unresolved trade disputes are having on Europe’s largest economy.
While a similar figure for the euro zone as a whole was healthier, it still undershot expectations across the board, hurting the single currency.
The euro dipped to its lowest in a month at $1.111 before recovering slightly to $1.114.
Compounding these worries, European parliamentary elections began on Thursday with euroskeptic parties expected to do well, raising concerns about the single currency’s stability.
The yen also advanced broadly as persistent US-China trade fears and Brexit concerns fanned risk aversion.
The yen was 0.57% firmer at 109.71 to the dollar, having pulled back from a two-week low of 110.675 plumbed on Tuesday.
Reports that the United States could impose restrictions on Chinese technology company Hikvision renewed market jitters about trade on Wednesday, reversing a relief rally that followed Washington’s move to temporarily ease curbs against Huawei Technology Co Ltd.
Brexit uncertainty has set sterling up for its 14th straight day of losses against the euro – its longest losing streak in the 20-year history of the single currency.

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