Investing.com – The dollar was up on Thursday morning in Asia, reaching a four-month high against the euro. The gap in the U.S. and European COVID-19 response continues to widen thanks to fresh lockdowns and a delayed vaccine rollout in the continent.
The U.S Dollar Index that tracks the greenback against a basket of other currencies inched up 0.04% to 92.650 by 9:53 PM ET (1:53 AM GMT), with the safe-haven U.S. currency remaining broadly strong following a two-day rally.
The USD/JPY pair edged up 0.20% to 108.94.
Meanwhile, Europe continues its battle against a third wave of COVID-19 cases. However, even Germany’s extended, strict lockdown failed to restore confidence in the regional economic outlook, with discontent with Chancellor Angela Merkel’s handling of COVID-19 compounded instead.
“The weak point in Europe remains around the vaccine rollout amid the rise in new virus cases and the tightening of restrictions … which likely means the mooted acceleration in Q2 may have to be pushed back by a quarter… the narrative of the U.S. outperforming Europe in the coming quarter remains,” National Australian Bank director of economics and markets Tapas Strickland said in a note.
Even Wednesday’s positive economic data for March, including the German Manufacturing Purchasing Managers’ Index (PMI) as well as the European Manufacturing and Service PMIs, failed to lift investor sentiment. The most recent lockdowns likely mean that the gains will not hold through April.
Investor concerns have been amplified, with the B.1.1.7. COVID-19 strain first seen in the U.K. driving the latest wave of cases said Commonwealth Bank of Australia (OTC:CMWAY) strategist Kim Mundy.
The euro hovered near the four-month low of $1.1809 touched earlier in the Asian session.
Back across the Atlantic, U.S. Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell reiterated their confidence in the U.S. economic recovery as they testified before Congress for a second day on Wednesday.
Yellen said she was open to banks buying back stock and paying dividends, a day after she mulled tax hikes to fund infrastructure upgrades and other investments and set off investors’ alarms. Powell added that 2021 will be a “very, very strong year in the most likely case.
Inflation remains a concern for investors, however, with disruptions in the supply chain exerting cost pressures for manufacturers. Wednesday’s manufacturing and services PMIs indicated that U.S. factory activity picked up in March.
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