Dollar Falls Again, But Manages to Stay Close to 20-Year High Thanks to Safe Haven Seekers

The US dollar edged lower in European trade early Wednesday but managed to hold near a 20-year high as investors sought safe havens amid renewed recession fears, rising gas prices and political uncertainty in the UK.

The Dollar Index against a basket of six non-dollar currencies was down 0.1% to 106.285 at 02:55 (0655 GMT), remaining close to its 20-year high of 106.57. EUR/USD fell 0.1% to 1.0260, just above 1.0236, its weakest level since late 2002, after the release of S&P GIobal's composite purchasing managers' index for the single currency bloc, which hit a 16-month low and signaled a looming recession. Fears of gas rationing in Europe as Russia threatens to cut supplies further are also adding to the negative sentiment. Electricity prices in Germany and France are at record highs compared to a year ago as regulators try to ensure enough gas is bought for storage as winter approaches. In Germany, factory orders delivered a rare bit of good news, rising 0.1% in May from April, the first rise in four months. Attention now turns to Eurozone retail sales figures due later in the session, which are expected to show a 0.4% monthly increase in May. GBP/USD fell 0.3% to 1.1923, near a two-year low as Prime Minister Boris Johnson came under severe pressure after the resignation of two senior ministers on Tuesday, saying both were unfit to govern. USD/JPY fell 0.6% to 135.04 as another safe haven, the Japanese yen, was in demand, while risk-sensitive AUD/USD fell 0.3% to 0.6780 amid concerns over the global economy. Of particular interest later in the session will be the release of the minutes of the last Federal Reserve meeting, which resulted in a 75 basis point rate hike, the largest rate hike by the US Federal Reserve since 1994. Investors are bracing for another 75 basis point rate hike at the end of the month as inflation remains at fairly high levels, which has caused the yield on the 2-year Treasury bond to rise above the yield on the 10-year Treasury bond on indicators. This is often considered a sign of an impending recession.   Source: Investing.com