Dollar Steadies despite Stocks Plummeting

The dollar held steady against a basket of currencies on Wednesday despite the stock market suffering the day before. Calm has gradually returned to global financial markets as investors partially reverse their rush to safe haven assets and move back to stocks.

Stack of US Dollars

The dollar index, used to measure the greenback’s strength against a basket of six major currencies, was almost flat. It stood at 89.608 moving away from a two-week high of 90.034 set overnight.

Euro rose slightly by 0.05 percent to $1.2384 following a two-week low set at $1.2314 the day before.

“How the dollar will fare with the recent tumult in stocks showing signs of settling down depends on which currency you are looking at,” said senior forex strategist, Junichi Ishikawa.

“Against the yen, the dollar stands to benefit as relief seen in Wall Street spills over into Asian equities,” Ishikawa added. “Against the euro, however, the dollar is likely to be capped, with U.S.-German yield differentials and monetary policy thoughts to dictate direction.”

The dollar inched down against the yen at 109.310 yen, 0.2 percent lower after a rise of 0.5 percent overnight. It was still comfortably hanging above the low of 108.460 marked on the previous day.

Australian dollar fell 0.2 percent to $0.7889 but still close from a one-month low recorded on Tuesday at $0.7835.

The pound rose by 0.05 percent to $1.3961 after it reached its weakest point since January 19 at $1.3838 overnight.

Another perceived safe haven, the Swiss franc, held steady at 0.9355 franc per dollar after losing 0.45 percent overnight.

Kiwi Weaker in Asia

The Kiwi continued to fall on Wednesday following mixed jobs data from Wellington hit sentiment on wage gains.

NZD/USD was trading down by 0.45 percent at 0.7307. New Zealand released the report on its fourth quarter labor cost index data showing a 0.4 percent gain on quarter. This was compared to an expected 0.5 percent rise and a 1.9 percent pace on year.

The unemployment rate also dropped to 4.5 percent compared to a 4.7 percent prediction.

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