U.S. Dollar Suffers Its Worst Month in a Decade

The euro rose the most in a decade this month, the British pound is headed for its best July since 1990, and for the first time this year, every major currency in the world rose against the greenback.

It’s all thanks to the dollar’s 4.6% plunge, its biggest monthly retreat since 2010.

The world’s reserve currency of choice was already on the backfoot when U.S. President Donald Trump raised the idea of delaying elections this year. He added fuel to a rout that was driven by falling U.S. Treasury rates, real yields near all-time lows and disappointment over America’s response to the coronavirus compared to Europe.

Data Thursday showed the world’s biggest economy shrank at a record 32.9% annualized pace in the second quarter, even amid unprecedented levels of monetary and fiscal stimulus from the Federal Reserve and the U.S. government. While that’s a 9.5% contraction on a non-annualized basis — significantly less dire than economic data out of Europe this week — the likes of Germany and France were quicker to implement lockdowns.

Also, the U.S.’s jobless claims figures, which showed an almost 900,000 increase in the number of people claiming continued benefits, warns of the impact a resurgence of the virus across the nation will have on the economy.

Here are some notable moves in the currency market this month:

Euro:

  • The common currency advanced more than 5% this month to the highest since May 2018. Bolstered by the European Union’s 750-billion-euro ($888 billion) rescue plan, appetite to bet on euro gains over the next month is the highest since March, according to risk-reversal options
  • The euro moved against the dollar “faster than anticipated,” said Manuel Oliveri at Credit Agricole, “EUR/USD has been driven higher by diverging expected growth differentials with asset allocation a strong driver,” he said

Pound:

  • Sterling has recovered losses since the lockdown began in March, trading as high as $1.3145 as of 11:40 a.m. in London. It’s 5.9% gain this month is the biggest since 2009
  • The British pound’s “fundamental backdrop is still soured by a lack of progress in EU-U.K. trade talks and by concerns over negative rates,” said Jane Foley, head of foreign-exchange strategy at Rabobank

Swedish Krona:

  • At 7.3%, the krona’s advance this month beat its nearest contender by more than a percentage point. The world’s best-performing major currency climbed to 8.6413 per dollar, the strongest in two years
  • READ MORE: Norway’s World-Beating Krone Risks Catch-Up by Swedish Currency

Japan’s Yen:

  • The Japanese yen strengthened more than 3% against the dollar in July, the biggest increase since 2018. Its appeal as a haven is growing as the dollar drops

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