The dollar hit another 13-month high against a basket of major currencies on Wednesday as safe-haven demand rooted in fears over fallout from the Turkish lira’s recent drop boosted the US currency.
The greenback's strength - overnight it also hit a 13-month high - has been bolstered by a fall for the euro, dogged by concerns over exposure of European banks to Turkey, reports Reuters.
“In light of all the turmoil we’ve seen out of Turkey and the subsequent contagion into other emerging markets, the dollar is pretty much establishing itself as the safe-haven currency,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.
“The dollar is the higher-yielding of the safe-haven currencies, so it obviously will attract the most flows. If you are going to park your money somewhere to stay away from the turmoil, the dollar is going to be the currency of choice,” he said.
As of 0353 GMT on Wednesday, an index that tracks the dollar against the euro, yen, and four other currencies .DXY (US dollar index) rose 0.1 per cent to trade as high as 96.862, its highest level since reaching 97.447 on June 27, 2017.
“In the current environment, the appeal of currencies other than the dollar has faded quite a lot,” said Kumiko Ishikawa, senior analyst at Sony Financial Holdings.
The Turkish lira started slipping again after rebounding more than 8 per cent overnight.
The currency briefly traded about 3 per cent weaker at 6.58 to the dollar before recouping some losses to 6.45 as of 0423 GMT. On Monday, it plunged to an all-time low of 7.24.
The lira has lost more than two-fifths of its value against the greenback this year, hit by worries over President Tayyip Erdogan’s calls for lower interest rates and fraying ties between the United States and Turkey, a NATO ally.
Erdogan said on Tuesday that Ankara would boycott electronic products from the United States, retaliating in a row with Washington.
The lira was supported by remarks from Turkish Finance Minister Berat Albayrak, who told a news conference the currency will strengthen.
The euro was down about 0.2 per cent at $1.1324, crawling back after touching a new 13-month low of $1.1319.
Against the yen, the dollar rose about 0.1 per cent to about 111.27 yen.
The pound also hit a 13-month low, dropping 0.2 per cent to $1.2694 on the back of weaker-than-forecast wage growth figures released on Tuesday.
