The dollar climbed on Friday as investors sought safe havens after Austria announced it would be the first Western European government to reimpose a complete lockdown due to rising COVID-19 infections, and Germany suggested it would follow suit, sending the euro down.
The dollar index, which measures the value of the dollar against a basket of six major currencies, rose 0.489 percent to 96.029, close to the 16-month high of 96.266 set on Wednesday. The dollar has gained almost 1% in the last week.
Meanwhile, despite the COVID increase in Europe and growing anticipation that interest rates may be raised quicker abroad, notably in the United States, the euro fell to a 16-month low.
Governor Christopher Waller of the Federal Reserve said the US central bank should accelerate the pace of reducing its asset purchases to allow it greater room to increase interest rates from near-zero levels sooner than expected if high inflation and strong job growth continue.
In addition to the lockdown, Austria has announced that from February 1, all of its people would be required to get vaccinated against COVID-19, while Germany’s health minister has warned that lockdown restrictions may be reinstated.
Commodity-linked currencies, such as the Australian, New Zealand, and Canadian dollars, which are frequently regarded as risky, have all fallen in value.\
On Friday, the European Central Bank President Christine Lagarde reiterated her cautious stance, saying the ECB should not tighten policy because it would jeopardise the recovery.
The Japanese yen, which is widely regarded a safe-haven currency, rose on Austria’s lockdown news, rising 0.22 percent to 113.99 yen against the dollar.
The Sterling was down 0.39 percent at $1.3448, giving up some of its recent gains.