The dollar retreated from its 9-week peak on Thursday, while the euro rose in cautious trade as a selloff in global equities markets gained momentum, hitting risk appetite.
The US dollar index, which gauges the greenback against a currency basket fell 0.1 percent to $96.07, lingering below its 9-week highs of $96.31 hit on Wednesday.
The dollar found support in the previous day after investors sought out safe-haven assets amid a selloff in stocks, but even with equities markets declining, moves in foreign exchange markets remained modest.
Shares extended losses on Thursday amid investor worries over a long list of economic and geopolitical issues.
Concerns over the health of the global economy, climbing US interest rates, Jamal Khashoggi’s murder, and global trade wars, along with some lower-than-expected corporate data became contributing factors to an atmosphere of growing risk aversion.
The dollar was little changed against the yen, gaining 0.03 percent to 112.28 after slipping to lows of 111.82 overnight.
Against the Swiss franc, the dollar rose 0.1 percent to 0.9990.
The yen and the Swiss franc increased only briefly on Thursday as currency traders showed little reaction to the selloff across stock markets.
Despite the slump in shares, concerns over corporate earnings growth and uncertainties about the global economy, forex investors only expressed caution on the yen and Swiss franc, two currencies regularly purchased during downturns.
The pound rebounded from 6-week lows, adding 0.09 percent to 1.2893, although gains remained capped as Brexit negotiations continued to encounter a delay with only over five months until the UK is set to leave the European Union (EU).
The Australian dollar, often seen as an indicator for global risk, climbed 0.5 percent to 0.7096.
Euro Remains Strong ahead of ECB Meeting
The euro, meanwhile, recuperated Wednesday’s 2-month lows ahead of the European Central Bank’s (ECB) monetary policy meeting.
The single currency advanced 0.1 percent to 1.1411 against the dollar after losing 0.6 percent in the previous session. The currency remained strong ahead of the ECB’s October meeting later in the day where it was expected to leave both interest rates and forward guidance unchanged.
Investors will be looking for any new guidance from the ECB at its meeting later on Thursday on a potential slowdown in growth, and the conflict between Brussels and Rome over Italy’s budget plans.
The bank is not expected to make any unexpected announcement, but instead will confirm that quantitative easing on course to end in 2019.
Analysts stated that after recent losses in the single currency, the euro/dollar pair could experience a momentary squeeze if the ECB was suddenly bullish.
The global economy continues to face higher inflation and tightening capacity, suggesting that central banks might need to continue tightening even in the face of rising market volatility, they said.
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