By Alun John

HONG KONG, (Reuters) – The dollar rose to a near two-year high against euro and an 18 month high against the pound due to fears over the economic effects of China’s COVID-19 locksdowns and aggressive U.S. rates hikes. Investors scrambled for safety.

China’s trade was steady in early trading but fell to 6.5770 USD after the People’s Bank of China stated late Monday night that they would reduce the number of foreign currency reserves banks are required to hold.

The currency recovered from Monday’s year-low of 6.699 per dollar. This was due to concerns about China’s economic growth.

The greenback was measured against six principal peers at 101.58 on Monday. This jump of 0.58% came after a peak of 101.86 two years ago.

This month it has seen a 3.3% increase, its highest monthly gain since November 2015.

The upside of the Further Index (dollar index), remains a solid bet. China’s growth risk is increasing as the authorities continue an aggressive COVID campaign. Conditions around Ukraine are volatile, and Fedspeak remains as hawkish” stated analysts from Westpac in a note.

China’s Financial Hub of Shanghai was under lockdown since around one month to stop COVID. On Monday, a Beijing official announced that the mass-testing program will expand from Shanghai’s largest district to 10 additional districts and 1 economic development area.

Several policymakers made hawkish remarks last week, raising concerns about global central banks tightening interest rates aggressively. Markets expect the U.S. Federal Reserve to increase rates by half a point each of its two upcoming meetings. [FEDWATCH]

These fears not only drove investors to the dollar but also caused stock markets to crash and U.S. Treasury yields fall. [MKTS/GLOB]

One fraction of a cent above its overnight low at $1.0697 was the euro, which is the weakest it has been since March 2020. This happened because market nerves prevailed over any optimism that might have resulted from the re-election French President Emmanuel Macron.

After hitting its lowest level since September 2020, the pound fell to $1.2744 at 1:2744. U.S. futures data reveal that funds made the largest wager against the Pound since October 2019. This bet is now close to $5 Billion.

The Australian dollar, once a market favorite, was $0.7177 overnight. This is due to the China lockdowns weighing on commodity prices.

Although the dollar lost 0.4% against yen to reach 127.62, it did not fall as much. This week, the Japanese currency saw a slight improvement from its 20-year low at 129.40.

The price was slightly higher at $40,500 and the ether at $3,000.

Researchers at crypto liquidity provider B2C2 said crypto market trading was currently correlated closely with equity markets and as there is “no crypto theme so far to override weakness from rates/growth/inflation/war concerns”.