On Monday, the dollar moved higher on easing concerns that Hurricane Irma weakened to a tropical storm and North Korea did not conduct a nuclear test over the weekend as expected.
The dollar index, which measures the greenback against a basket of six major currencies, gained 0.38 percent at 91.697. The index had reached a more than 2-1/2-year low of 91.011 on Friday as investors worried about the short-term impact of Hurricane Irma on the U.S. economy and were concerned about heightening tensions between North Korea and the United States.
North Korea marked the anniversary of its founding without any further missile or nuclear tests. The United States and its allies had been preparing for another long-range missile launch in time for the 69th anniversary of North Korea’s founding on Saturday.
“It’s a little bit of a relief rally I suppose,” stated Brad Bechtel, managing director FX at Jefferies.
“We were pretty oversold going into the end of the week in the dollar and there was a lot of potential risk on the horizon,” he added.
“The fact that we didn’t get much on that front is helping the dollar recover a little bit.”
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The dollar increased 0.95 percent against the Japanese yen.
Speculators have been losing confidence in U.S. President Donald Trump’s ability to pass his proposed tax overhaul and infrastructure spending plans, which were anticipated to increase growth and inflation, advancing the rate of interest rate hikes by the Fed.
The euro dropped towards the day’s lows after ECB board member Benoit Coeure reported that improved euro zone growth could offset some of the negative effects of the euro’s strength but a consistent exchange rate shock could bring inflation down.
The single currency dropped 0.41 percent to $1.1984, pulling back from the 2-1/2-year high of $1.2108 hit on Friday.
Sterling gained to a 3-1/2-week high versus the euro on Monday, boosted by speculation that the Bank of England may sound more hawkish on interest rates this week.