Dollar erases early losses on global economy worries

FILE PHOTO: A packet of former U.S. President Abraham Lincoln five-dollar bill currency is inspected at the Bureau of Engraving and Printing in Washington March 26, 2015. REUTERS/Gary Cameron/File Photo

LONDON (Reuters) - The dollar erased earlier losses against its rivals on Wednesday on growing concerns that the economic damage to the global economy from the coronavirus pandemic will be long and protracted, boosting the safe-haven appeal of the greenback.

The U.S. currency has weakened in the previous four consecutive sessions on cautious optimism that virus-induced fatalities in the world may be approaching a peak. But analysts warn that it remains unclear whether economies will recover quickly or whether it might take longer than expected.

“That means the worst might yet be to come, facing the market with an ice bucket challenge,” said Ulrich Leuchtmann, head of FX strategy at Commerzbank in Frankfurt. “In that case risk aversion would rise, allowing the dollar to appreciate again.”

In early trading on Wednesday, the dollar bounced off early lows hit in Asian trading and rose 0.2% at 99.10 =USD against a basket of its rivals, potentially breaking a four-day losing streak.

Reporting by Saikat Chatterjee; Editing by Tommy Reggiori Wilkes