Investing.com - The dollar edged higher in early European trade Friday, with investors seeking this safe haven amid fears of a second wave of the Covid-19 outbreak and the possibility of renewed lockdowns to curb the spread.
At 2:55 AM ET (0655 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up marginally at 96.743. USD/JPY traded 0.3% higher at 107.12, while EUR/USD gained 0.1% to 1.1307.
These fears have grown with the U.S. reporting more than 2 million Covid-19 cases as of June 12 and a number of the more populous states reporting increased numbers of infections.
“The three most populous states, California, Texas and Florida, all struggle with high levels of new infections and Texas and Florida have seen a renewed increase lately,” said analysts at Danske Bank, in a research note. “This may be spooking the markets as to getting the virus under control and seeing a continued normalisation, including a ramp-up in spending.”
That said, “the bar for turning to lockdowns again seems very high, though. Not least in the U.S., where there is strong opposition to this,” Danske added.
Additionally, the market was still digesting a grim picture of the U.S. economic recovery painted by the U.S. Federal Reserve after it concluded its policy meeting on Wednesday.
Elsewhere, sterling has weakened across the board after data showed that Britain's economy shrank by a record 20.4% in April from March as the country spent the month in a tight coronavirus lockdown.
“At the same time, the Brexit news flow does not look encouraging,” Danske said, “as the U.K. and the E.U. still seem far away from each other."
Financial Times reported Thursday that the high level summit between U.K. PM Boris Johnson, European Commission President Ursula von der Leyen and European Council President Charles Michel is set to take place on June 15.