MacroscopeHow floods, wildfire and the Delta virus surge have investors seeking US dollar safe haven

Name: Indonesian volunteers deliver free food to self-isolating Covid-19 patients as cases spike
Uploaded: 2021-07-27T17:30:06.000Z
Duration: 2 min 9 s
Description: Indonesian volunteers deliver free food to self-isolating Covid-19 patients as cases spike

The US dollar’s recent outperformance against the euro, renminbi and other currencies has less to do with its own allure and more to do with the combination of factors that has spooked investors

Continuing US-China tensions have not helped, becoming one more reason for investors to be cautious

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A man walks through piles of damaged and discarded household items after flooding in Liege, Belgium, on July 19. Skittish markets have been further unnerved by the loss of life and economic dislocation caused by extreme weather events from the US and Europe to China. Photo: AP

Neal Kimberley

Published: 1:30am, 28 Jul 2021Updated: 4:22am, 28 Jul 2021

The US dollar has been doing well on the foreign exchanges recently but that doesn’t mean investors have fallen in love with the greenback. It feels more like a marriage of convenience. The currency market looks to have concluded that, for now, the US dollar is the cleanest shirt in a dirty laundry basket.

That narrative might give a crumb of comfort to those who see the greenback weakening in due course, but US dollar strength may persist for a while.

Markets have become skittish in the face of an unappealing combination of the global spread of the Delta variant of Covid-19, a succession of extreme weather events, and continuing signs of substantive policy differences between China and the United States.

The more transmissible Delta variant continues to spread across the world. In some countries, where vaccination programmes are advanced, the link between the virus and hospitalisations and death seems to have been weakened but not severed. Where vaccination programmes are less advanced, the Delta variant is wreaking havoc.

In Asia, for example, Indonesia has become the new epicentre for Covid-19 with the Delta variant spreading rapidly across the country. Higher numbers of cases are also being reported in Thailand.

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Indonesian volunteers deliver free food to self-isolating Covid-19 patients as cases spike

In the currency space, the worst may now be priced in, but the Indonesian rupiah and Thai baht have certainly not had the easiest of times versus the US dollar in recent weeks.