Dollar reaches highs of the year and instability in Europe causes flight to refuges | ECONOMY

The Bloomberg Dollar Spot Index is one step away from levels last recorded in November, as technical indicators reveal that the greenback’s strength still has some way to go. The premium paid to protect against a rise in the U.S. currency relative to a fall over the next three months against a basket of peers rose to the highest level in more than a year.

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Leaders of France’s left-wing parties called for unity at their first campaign event and European Central Bank officials see no cause for alarm in the market turmoil that gripped the country last week.

These measures went some way to calming investor nervousness, although many remain on alert for any shift in risk that could reignite a stampede toward the greenback.

The dollar has been advancing for four weeks, as high US interest rates and recent political disputes reinforce the currency’s attractiveness. The break of its medium-term weekly downtrend was also a bullish signal for investors.

However, traders may be walking a tightrope if data continues to show signs that the world’s largest economy is cooling, raising the risks that the Fed will cut rates sooner than markets expect.

The US currency consolidated in Asian trading on Tuesday, strengthening against all Group of Ten peers this month except the Swiss franc and Swedish krona. Traders will also be keeping a close eye on the impending US elections, which are about to inject new uncertainty into the markets.

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