By Gina Lee

Investing.com – The dollar was down on Tuesday morning in Asia but was near a two-year high against the euro and an 18-month high versus the pound. The dollar, a safe haven asset, gained traction due to concerns over the impact of China’s COVID-19 locksdowns on the economy and U.S. rates hikes at an aggressive pace.

By 11:32 ET (03:32 GMT), the that measures the greenback against other currencies had fallen 0.2% to 101.535

It fell by 0.15%, to 127.92

The exchange rate rose by 0.60%, to 0.7220. Australian markets open after holidays. This was a 0.39% increase on the previous 0.6639.

While the pair fell 0.41% at 6.5325, it rose 0.23% to 1.2777.

China’s currency was steady in the early trade at 6.5770 USD. This is due to the reduction in the money banks must have as a reserve to hold foreign currencies on Monday. This move saw the yuan rise from its previous low of 6.699 per dollar on Monday.

The dollar index rose 0.58% Monday to 101.86, a peak reached two years ago. This is the biggest gain since November 2015, when it has seen 3.3% growth in April 2022.

It remains an attractive bet that the future dollar index will rise. China growth risks increase as authorities push an aggressive COVID-19 Campaign, while conditions in Ukraine are volatile and Fedspeak is as hawkish today,” Westpac analysts wrote in a note.

Since around one month, the COVID-19 lockdown has been in effect in Shanghai. A mass-testing campaign currently underway in Beijing’s most populous district will be expanded and is stoking fears of a lockdown.

The likelihood of further tightening interest rates was also increased by the Hawkish statements made last week by central bank policymakers. Widely, the U.S. Federal Reserve expects to raise interest rates by half-point each of its next two meetings. This concern not only drove investors away from the greenback, but it also caused large equity market sell-offs and U.S. Treasury yields fall.

Overnight, the pound fell to its lowest level since September 2020 across the Atlantic. According to U.S. Futures Market Data, funds have made their largest bet against the pound in October 2019 – now close to $5 Billion.

In Asia Pacific, the Australian dollar hit a two-month low overnight as China’s COVID-19 lockdowns weighed on commodity prices. However, the dollar dropped 0.4% against the Japanese yen. The Japanese currency managed a slight recovery from its 20-year low at 129.40 the week before.

It was slightly more conservative at $40,500 and ether at $3,000 respectively. Cryptocurrencies market trading is currently correlated closely with equity markets and there is “no crypto theme so far to override weakness from rates/growth/inflation/war concerns,” B2C2 researchers told Reuters.