TOKYO- The safe-haven US dollar traded close to a 16-month high to the euro on Monday on growing anxiety over the impact of surging COVID-19 infections in Europe, with Austria reimposing a full lockdown and Germany considering following suit.
The greenback was near its strongest since early October against the riskier Australian and Canadian dollars, with the commodity-linked currencies also pressured by a slump in crude oil.
The dollar got additional support from bullish comments by Federal Reserve officials Richard Clarida and Christopher Waller on Friday who suggested a faster pace of stimulus tapering may be appropriate amid a quickening recovery and heated inflation.
An more rapid end to tapering raises the possibility of earlier interest-rate increases too. Currently the market is priced for the Federal Open Market Committee (FOMC) to start hiking rates by the middle of next year.
The dollar index, which gauges the currency against six major peers, traded at 96.065, staying within sight of last week’s 16-month high of 96.266.
The euro slumped 0.23 percent to $1.1274, approaching its lowest since July of last year at $1.1250, reached Friday, when it tumbled 0.66 percent.
“EURUSD has been in free-fall and will likely get the lion’s share of attention from clients looking for a play on growing restrictions and tensions across Europe,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a note to clients.
