Investing.com – The dollar was trading close to its high of two weeks against a basket of its rivals on Tuesday, as concerns about the global economic outlook is supporting demand of investors for safe-haven securities.
The dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.14% to-96,12, the highest since January 4, at 02h50 ET (07h50 GMT).
The international monetary Fund has reduced on Monday its forecast of world growth, citing a slowdown greater than expected in China and in the euro area and said that a failure to resolve the trade tensions could further destabilize the slowing global economy.
The downgrade comes just hours after China announced a quarterly economic growth slowest since the financial crisis and its annual expansion the weakest since 1990.
The dollar was slightly lower against the japanese yen which is often sought by investors as a safe haven in times of uncertainty in the markets, with USD / JPY down 0.11% to 109,53.
The greenback rose over 1% against the yen last week, reaching its highest level in two and a half weeks to 109,88 Friday.
It is generally expected that the Bank of Japan keeps its policy unchanged at its next meeting later in the week and analysts expect that the monetary policy will remain highly accommodative in Japan this year.
“The slowdown of the global economy and the decline in oil prices should compel the BoJ to revise down its outlook for economic growth and inflation,” said Osamu Takashina, a strategist in foreign exchange at Citibank.
The dollar has also suffered pressure, concerns over the slowdown in global growth have forced the u.s. federal Reserve to adopt a cautious approach to any further increase in interest rates. Futures contracts on interest rates do not reflect any anticipation of a rate increase by the Fed this year, and the recent comments from Fed officials have also suggested that they not tight the monetary policy in the coming months.
“We do not see that the federal Reserve raises rates this year, which should lead to dollar weakness. We also believe that the dollar is too bought and over-valued according to fundamentals,” said Jason Wong, strategist of main market at BNZ Markets.
The euro remained almost unchanged for the day, with the EUR / USD to 1,1358.
The british pound remained stable, with the GBP / USD to 1,2889 due to the persistent uncertainty on the Brexit.
On Monday, the first british minister, Theresa May, has proposed a motion on the next steps that it proposes, in order to break the deadlock in Parliament, after his divorce agreement on the Brexit has been rejected by an overwhelming majority last week.
“While the deadlines are approaching very quickly, and that there seems to be a genuine impasse between the various parties involved, the prospect of Brexit “without consent “seems to be becoming more likely,” said Nick Twidale, managing director of Rakuten Securities in a note.
The australian dollar was slightly lower, with AUD / USD falling 0.12% to 0,7147. The australian dollar is expected to remain under pressure due to the weakening of sentiment towards China, its main trading partner.