Dollar rises on China fears

The dollar gained ground across the board today, boosted by safe-haven demand which was driven by concerns about a possible slowdown in China, which affected stocks in both Europe and the US.

Global miner BHP Billiton revealed that there were indications that there has been a flattening of growth in iron-ore demand in China, Australia’s biggest export market, reports Reuters. That saw the Australian dollar decline by over one per cent.

China’s National Development and Reform Commission also increased domestic retail energy prices as of today, the second time it has done so in under two months. Even though there is still a wide gap between domestic and international prices, investors were worried that increased energy costs could further undermine the already slowing Chinese economy.

Washington-based Travelex Global Business Payments’ senior market analyst Joe Manimbo said that the greenback is gaining due to its safe-harbour appeal on concerns about Chinese growth. He explained that the risk-off market which is being seen has raised demand for the dollar as it has made it a safe haven.

In late afternoon trading on Tuesday, the dollar index, which is a gauge of its current value against six of the most powerful currencies, had increased by 0.2 per cent at 79.613, going up for a second successive day.