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Title: Dollar Soars to Two-Decade High; Safe Haven Demand on Global Growth Fears

May 09, 2022 02:52AM ET

By: AnalysisWatch

In early European trading Monday, the US dollar reached a two-decade high as traders sought this safe haven amid concerns about global economic growth and in search of yield.

At 2:50 AM ET, the dollar index, which tracks the greenback against a basket of six other currencies, rose 0.5% to 104.170, a level not seen in 20 years, after rising for a fifth straight session last week.

The war in Ukraine and tighter bans on COVID-19 in Beijing and Shanghai have created uncertainty about economic growth in Europe and Asia.

In contrast, data released Friday showed that U.S. nonfarm payrolls rose by 428,000 in April, more than expected. This suggests that demand for labor remains strong and companies are scrambling to hire enough workers to keep up with robust consumer demand.

EUR/USD fell 0.4% to 1.0509, marginally above its recent low of 1.0469; USD/JPY rose 0.4% to 131.12, a two-decade high; while GBP/USD fell 0.5% to 1.2277, a new 22-month low, despite the Bank of England's decision on Thursday to raise interest rates for the fourth consecutive month.

The U.S. Federal Reserve announced a 50 basis point rate hike last week, the largest increase since 2000, and the yield on 10-year U.S. Treasury bonds continued to rise ahead of Wednesday's expected inflation figures on fears of a positive surprise.

Futures markets expect a 75% probability of a 75 basis point rate hike at the next Fed meeting in June and a tightening of more than 200 basis points by the end of the year.

The USD/CNY rose 0.8% to 6.7200, a fresh 18-month low, after the country's trade data was released and COVID-19 freezes remained in place, while the AUD/USD fell 1.1% to 0.7000, just below its January low.

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