Dollar Edges Higher; Caution Reigns as Week Starts

The dollar edged higher in early European trading Monday, with traders starting a fresh week in a cautious vein given last week’s turmoil in the equity markets.

At 3:05 AM ET (0805 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 90.575.

USD/JPY rose 0.1% at 104.72, EUR/USD fell 0.1% to 1.2125, while the risk-sensitive AUD/USD rose 0.2% at 0.7659.

Wall Street’s main equity indices suffered their worst week since the end of October last week as hedge funds were forced to liquidate positions to generate funds as retail traders ganged together to buy heavily-shorted stocks, such as GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC). 

Although some of this pressure seems to have eased early Monday, foreign exchange traders are still wary of this war erupting once more. Throw in disagreements on Capitol Hill over President Joe Biden’s proposed $1.9 trillion Covid relief bill and delays to global vaccine rollouts and foreign exchange traders are happy to remain in the dollar safe haven, and least for now.