The dollar is falling as safe flows move to the yen and the Swiss franc

The dollar is falling as safe flows move to the yen and the Swiss franc

The dollar fell across the board on Thursday, hitting a two-week low and extending its retreat from a two-decade peak, as most major currencies hammered by the greenback’s rise this year attracted buyers. With global financial markets becoming more volatile, the dollar has fallen sharply versus the Japanese yen and the Swiss franc, which tend to draw investors during times of market stress or danger.

The U.S. Dollar Currency Index, which tracks the greenback against six major currencies, was down 1.0% at 102.79, its lowest since May 5. That puts the index on pace for one of only six instances over the past five years when it logged a 1-day loss of 1% or more. The index hit a near two-decade high last week as a hawkish Federal Reserve and growing worries about the state of the global economy helped lift the U.S. currency.

However, the dollar performed poorly against riskier currencies such as the Australian and New Zealand dollars, as these currencies’ year-to-date losses drew some purchasers.  “Investors have perhaps just had enough of the USD and are looking to diversify risk – especially as broader USD support from rising U.S. yields appears to have maxed out,” said Shaun Osborne, chief currency strategist at Scotia Bank.

The index is up 7.5% for the year. On Thursday, the dollar slipped to a 3-week low against the yen and a 2-week low against the Swiss franc. Analysts, however, warned against reading too much into the dollar’s retreat. “Yes, the dollar is broadly lower today despite risk-off conditions in the cross-asset space, but does this mean the dollar’s haven status is starting to weaken? Most probably not,” said Simon Harvey, head of FX Analysis at Monex Europe.

Britain’s pound rose 1.2% against the dollar on Thursday, but remained close to the 2-year low touched last week as soaring inflation combined with a murky growth outlook capped gains. Meanwhile, bitcoin rose 4.7% and was last trading at $30,039.31, continuing to try to shake off the weakness that has engulfed cryptocurrencies in recent days.

The Swiss franc was supported against the dollar and the euro after Swiss National Bank president Thomas Jordan signaled on Wednesday the SNB was ready to act if inflation pressures continue. The euro rose to a more than 1-week high against the dollar, as investors priced in the chance of an aggressive near-term tightening path by the European Central Bank.

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