Haven buying propels the US dollar higher

The greenback enjoyed a robust overnight session as investors rotated out of G-10 currencies and into dollar and yen haven positioning. The dollar index rose through its 50-day moving average (DMA), finishing 0.50% higher at 93.50. It may well test monthly resistance at 94.00 into the end of the week.

EUR/USD fell 0.40% to 1.1750 with significant support nearby at 1.1700. A failure would target further losses to 1.1700. The dollar-bloc currencies came in for particular attention. The AUD/USD fell 1.15% to 0.7046, retreating through its 100-DMA at 0.7115. The 0.7000 region is critical support now. The NZD/USD fell 1.05% to 0.6735 with the 100-DMA at 0.6600 its next important support. USD/CAD rose 1.05% to 1.3320, just shy of its 100-DMA at 1.3335. An under-dovish Bank of Canada in a firm “lower for longer” mode did not help the loonie, with USD/CAD targeting monthly resistance at 1.3420.

Asian currencies fared much better. Although regional currencies edged lower versus the greenback, the risk-reduction selling was clearly more prevalent amongst the G-10 grouping. The PBOC fixing for USD/CNY was slightly higher today at 6.7260, but overall, a firm CNY continues to be a solid anchor for other Asian currencies. I continue to expect Asian currencies to outperform G-10 currencies over the next week and possibly longer, depending on how chaotic the US election result is.

The US dollar has edged lower in Asia, as US equity index futures have rallied in Asia, limiting the stock-market fallout in the region. The Biden/tariff story from Reuters has also added a measure of support to battered G-10 currencies. It is likely to be a temporary respite though, with further “blue wave” unwinding to come ahead of November 3rd, haven currencies such as the US dollar will continue to outperform.