Dollar jumps as China Covid worries spur safe-haven buying

The US dollar rallied against major currencies on Monday, as rising Covid-19 cases in China led to new restrictions there and weighed on global investor sentiment.

China is battling numerous coronavirus flare ups. Two deaths were reported in Beijing on Sunday, and the city’s most populous district urged residents to stay at home on Monday.

The new cases have cast doubt on hopes that the government could soon ease its tough restrictions. That has boosted the dollar, which is seen as a safe haven in times of stress, reported Reuters.

The dollar rose 0.98% against Japan’s yen to 141.75, its highest since Nov. 11. Meanwhile the euro dropped 0.83% against the greenback to $1.024.

“The outlook for China’s zero-Covid market will remain a key source of volatility,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

“If we do see another set of step up in restrictions, it indicates to me that the Chinese officials are still wary of any eventual reopening.”

The greenback was also rebounding somewhat after a sharp fall in recent weeks, analysts said.

“I look at the dollar’s rally this morning as a reflection of recent weakness, rather than as a sign that anything is changing,” said Kit Juckes, chief FX strategist at Societe Generale.