Dollar rises for 2nd day on Afghanistan, Delta variant woes

NEW YORK/LONDON (Reuters) – The dollar gained for a second straight session on Tuesday, bolstered by safe-haven demand as investors fretted about Afghanistan, China’s plans to regulate the internet sector, and the Delta variant COVID-19 spread which forced some lockdowns.

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The overall tone in financial markets was one of caution, with shares on Wall Street in the red.

Asian shares were also rattled earlier by concerns about China’s move to crack down on internet companies as it lowers the boom on its powerful tech sector.

A much sharper decline than expected in Tuesday’s U.S. retail sales curbed gains in the dollar, but that was offset by the higher-than-forecast rise in industrial production.

“The dollar is on a roll as global risks rise,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

“Part of the boost stems from a trio of uncertainties related to China …A ghanistan, and the virus continuing to multiply. Retail sales were largely dismissed as they didn’t meaningfully alter the bullish outlook for spending given the strengthening job market.”

U.S. military flights evacuating diplomats and civilians from Afghanistan restarted on Tuesday after the runway at Kabul airport was cleared of thousands desperate to flee following the Taliban’s sudden takeover.

In mid-morning New York trading, the U.S. dollar index rose 0.4% to 92.95. The euro, the biggest component in the dollar index, fell 0.4% to $1.1732.

The New Zealand dollar, meanwhile, tumbled to its lowest in three weeks on Tuesday after the country identified its first COVID-19 case since February, prompting the government to announce new short-term lockdown measures.

The currency fell sharply in early Asian trading hours, after Prime Minister Jacinda Arden said Auckland – where the case was reported – would go into lockdown for seven days, while New Zealand as a whole will have the toughest level of lockdown for three days.

It was last down 1.4% at US$0.6919, after dropping to US$0.6905, the lowest since late July.

The Australian dollar fell to a nine-month low after central bank meeting minutes were seen as dovish. It was last down nearly 1% at US$0.7264.

The minutes showed the Reserve Bank of Australia (RBA), which surprised markets by sticking to its plan to start tapering bond buying, would be prepared to take policy action, should lockdowns threaten a deeper economic setback.

The safe-haven Japanese yen was down against a firm dollar, which rose 0.2% to 109.42 yen. The Swiss franc, another safe haven, was little changed to slightly lower versus the dollar, which was last at 0.9128 franc.

The two currencies were boosted in recent days by weak U.S. and Chinese economic data which stoked worries that the spread of the Delta variant could slow the recovery from COVID-19.

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