September 25, 2019 / 12:42 AM / 19 days ago

Dollar rebounds as safe-haven flows support

NEW YORK (Reuters) - The dollar rose across the board on Wednesday, rebounding from the previous day’s slide as investors nervous about an impeachment inquiry against U.S. President Donald Trump sought a safe haven, and as sterling fell 1% on nagging uncertainty about Brexit and an election.

FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, British pound and Chinese yuan banknotes are seen in this picture illustration, January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo

Trump pressed Ukraine’s president to investigate his leading Democratic rival, former Vice President Joe Biden, in coordination with the U.S. attorney general and Trump’s personal lawyer, according to a summary of a telephone call released by the administration.

A day earlier, House of Representatives Speaker Nancy Pelosi said the Democratic-led chamber was launching an official impeachment inquiry, setting up a political showdown as Trump campaigns for re-election in 2020.

Increased political risk have boosted the dollar’s appeal for investors seeking safety and stability, analysts said.

“There are political battles brewing on both sides of the Atlantic,” said Juan Perez, senior currency trader at Tempus Inc in Washington.

“I think that overall the dollar’s safe haven status is understood,” he said.

The greenback is viewed as safe-haven due to its standing as the world’s reserve currency.

The dollar index, which measures the greenback against six major currencies, was up 0.7%, on pace for its biggest daily rise in nearly three months. On Tuesday, the index slipped 0.3% to finish the session at 98.337.

Part of the strength of the dollar’s move on Wednesday was an unwinding of the knee-jerk investor reaction to the impeachment inquiry news that sparked the previous day’s slide, analysts said.

The immediate reaction to sell the dollar was questionable, Adam Cole, a currency analyst at RBC Capital Markets, said.

“For a couple of reasons it’s not a sell risk or sell dollar story,” he said, saying there was still a small chance that Trump would be impeached.

The British pound dropped more than 1% versus the dollar, ceding gains made the previous day after the Supreme Court’s ruling against Prime Minister Boris Johnson, as investors priced in many more months of Brexit and general election risk.

Meanwhile the euro, which has been dogged by worries about the dismal state of the euro zone economy, shed 0.68% on Wednesday.

Editing by Marguerita Choy and David Gregorio

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