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U.S. Dollar Hit by Demand for Safe-Haven Currencies

Investing.com - Even though the U.S. dollar hit a four-month high against the Chinese yuan on Monday, the greenback was under pressure as investors piled into safe-haven currencies such as the Japanese yen and Swiss franc.

“The re-opening of the U.S.-China trade war has come as a surprise. We suspect a deal will be concluded in (the third quarter), but until then, investors look set to play it safe,” ING Head of FX Strategy Chris Turner said.

As the Sino-U.S. trade dispute escalated further as Beijing responded to higher U.S. tariffs on Chinese products with increased tariffs on $60 billion in U.S. imports, the Chinese yuan lost further ground, sinking to fresh four-month lows against the greenback. USD/CNY was up 0.8% at 6.8792 by 10:35 AM ET (14:35 GMT), levels not seen since Jan. 3.

The Australian dollar shared a similar fate, down 0.5% against the greenback due to its correlation to the Chinese economy.

But with sharp declines in U.S. stocks, the dollar was under pressure as investors looked for refuge in safe-haven assets such as gold, the yen or the Swiss franc. USD/JPY was off 0.8% 109.09, near lows not seen since Feb. 1, while USD/CHF dropped 0.6% to a nearly one-month low of 1.0054.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.2% to 96.91, after touching its cheapest level since April 18 earlier in the session.

With no major economic reports on either side of the Atlantic, a weak dollar benefitted both the euro and British pound.

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