Dollar jumps as investors seek safety after dismal US data

U.S. one-hundred dollar banknotes are arranged for a photograph in Hong Kong on April 15, 2019.
Paul Yeung | Bloomberg | Getty Images

Bleak U.S. retail sales figures and a dramatic drop in New York state manufacturing data sent the dollar higher on Wednesday as investors fled risk assets for safe havens.

Wednesday's data underlined growing investor fears that the damage to the global economy from the coronavirus outbreak will be long and protracted.

The U.S. dollar index, which had fallen in the four previous trading days, rose as high as 99.98, but had returned some of those gains later in the morning, last trading up 0.6%.

Against other traditional safe havens the dollar fell modestly: It was last down 0.25% against the Japanese yen and 0.54% weaker against the Swiss franc.

The Commerce Department on Wednesday reported that U.S. retail sales suffered a record drop in March as mandatory business closures to control the spread of the novel coronavirus outbreak depressed demand for a range of goods, setting up consumer spending for its worst decline in decades.

The New York Federal Reserve also reported on Wednesday that its Empire State manufacturing index, which tracks activity in the sector for New York State, fell to an all-time low that was more than double the consensus Wall Street forecast.

"The dollar caught a stronger tailwind as record weak U.S. data added to global gloom and kept investors chasing safer bets," wrote Joe Manimbo, senior market analyst at Western Union Business Solutions.

"The data is consistent with the coronavirus taking a growing toll on the world's biggest economy."

The global economy is expected to shrink by 3% during 2020, a collapse in activity that will mark its steepest fall since the Great Depression of the 1930s, the International Monetary Fund said on Tuesday.

A fall in oil prices on expectations that production cuts by OPEC may not be enough to support crude during a global demand crunch also weakened riskier currencies, with the oil-exposed Norwegian crown and Canadian dollar down sharply.

The Norwegian crown fell almost 2% against the U.S. dollar, while the Canadian dollar was down more than 1.5% versus the greenback.

The Bank of Canada on Wednesday said the coronavirus outbreak was set to trigger the biggest ever near-term Canadian slump. The central bank held interest rates steady at 0.25% as expected, added provincial and corporate bonds to its quantitative easing program, and said it "stands ready to adjust the scale or duration of its programs if necessary."