Dollar Retains Strength as U.S. Economy Outperforms By

Dollar Retains Strength as U.S. Economy Outperforms By

© Reuters.

By Peter Nurse – The dollar remained strong in early European trading Thursday, near multi-month highs amid expectations of strong U.S. economic growth, helped by more fiscal stimulus and an accelerating vaccine rollout. 

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 93.312, having hit a five-month high of 93.472 earlier. 

rose 0.1% to 110.78, having risen to as high as 110.97, its highest level in a year. was down 0.1% at 1.3759, while the risk-sensitive fell 0.7% to 0.7544.

U.S. President Joe Biden unveiled his long awaited $2 trillion-plus infrastructure rebuilding plan on Wednesday, injecting more funds into the U.S. economy after his recently approved $1.9 trillion coronavirus relief package.

This comes with the U.S. economy already showing signs of a strong recovery as its aggressive vaccination program results in large parts of the country reopening.

The ADP report on Wednesday showed increased by 517,000 jobs last month, a precursor to Friday’s official which is expected to show another increase of around 650,000 payrolls in March.

A survey by the on Thursday is expected to show a further improvement in the manufacturing activity.

This increased optimism in the U.S. dollar is best reflected against the euro, with down 0.1% at 1.1723, not far off the near five-month low of 1.170 after ECB President Christine Lagarde’s dovish interview on Wednesday.

Large parts of Europe are struggling with a third wave of the Covid-19 virus, shutting down much of the region, resulting in Germany’s dropping 9.0% on the year in February.

“The environment is clearly supportive for USD, particularly when Europe continues to battle with the third Covid wave,” said analysts at ING, in a note. 

But “USD upside in Q2 should be more limited and European FX should eventually see some reversal,” ING added, as Europe’s vaccination process gathers pace while the American  infrastructure spending is accompanied by around $1.8 trillion worth of tax hikes.

Elsewhere, rose 0.3% to 6.5715, after China released a disappointing earlier in the day, reading 50.6 for March, the lowest level since April 2020, and a drop from February’s 50.9.

These findings contrast with those in an official survey, released Wednesday, which showed manufacturing activity grew at a stronger pace.


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