The dollar rose against five of its six rival G-10 currencies Tuesday as investors worried that the Fed could raise rates prematurely, and that negotiations between Greece and its creditors could capsize.
The ICE U.S. Dollar Index, a measure of the dollar’s strength against a basket of six rival currencies, rose 1.1% to 98.62, as U.S. stocks plummeted, with the Dow Jones Industrial Average seeing its worst day since Oct. 9.
The dollar climbed against the euro, pound, Canadian dollar, Swedish krona and the franc, but traded lower against the yen, which analysts consider a safe-haven asset.
“The inconsistent gain in the dollar is more of a function of a flight to quality than to the market’s optimistic outlook on the U.S. economy,” said Kathy Lien, managing director of FX Strategy at BK Asset Management. “I think fear is driving the market today,” she noted.
The euro traded at $1.0700 Tuesday evening, a level not seen since April 2003. That compares with $1.0853 late Monday in New York. The shared currency accelerated its slide, flirting with a 12-year low, after Greek Finance Minister Yanis Varoufakis said European leaders have known all along that Greece would never repay its massive debt.
Analysts said record-low bond yields in Germany, France and elsewhere in Europe implied that the euro will continue to fall. The 10-year bund yield has fallen to a record low of 0.238%, down 7.5 basis points on the day.
The greenback traded at ¥121.13, after rising to ¥122.01 during the European trading day, its highest level against the Japanese yen since July 2007. The dollar bought ¥121.15 late Monday.
Meanwhile, the dollar traded at $1.50 to the pound compared with $1.51 Monday; at 8.56 krona to the dollar, compared with 8.49; at 0.9994 franc to the dollar, versus 0.9864 and 78.79 cents to the Canadian dollar, up from 79.21.