The dollar rose to a three-week high on Thursday, as stock markets weakened broadly after Federal Reserve Chairman Jerome Powell dismissed speculation over U.S. interest rates entering negative territory.
European stock markets fell, and U.S. stocks were also down, the third consecutive session of losses and sending investors to the relative safety of the greenback.
Comments from top U.S. infectious disease expert Anthony Fauci earlier this week, warning about the premature lifting of lockdowns that could lead to additional outbreaks of the deadly novel coronavirus, also dented market sentiment, analysts said.
"This whole week has been fairly risk off. There's a lot of factors to point to, from Powell, to Fauci, to Trump," said John Doyle, vice president of dealing and trading, at Tempus Inc. in Washington. "Still, the dollar is king when this happens," he added.
U.S. President Donald Trump on Thursday said he was disappointed with China over its failure to contain the coronavirus, and that the pandemic cast a pall over his U.S.-China trade deal.
His comments stoked concerns about renewed U.S.-China trade tensions.
Against a basket of its rivals, the dollar was up 0.3% at 100.41, hitting a three-week high of 100.56 earlier in the session.
Though Powell was the latest in a parade of policymakers to brush off the notion that rates may go negative, Fed futures were pricing a small chance of sub-zero U.S. rates by May next year.
Powell said the recovery could take some time as he warned of a recession worse than any since World War Two.
"His words were a blow to the optimism that had been building in the markets over the last few weeks as the relaxation of social distancing restrictions had generated expectations of a V-shaped recovery from the virus crisis," said Raffi Boyadjian, senior investment analyst at XM.
Data showing millions more Americans, including white-collar workers, filed for unemployment benefits last week only cemented bids on the dollar. Initial claims for state unemployment benefits totaled a seasonally adjusted 2.981 million for the week ended May 9. That was down from 3.176 million in the prior week and marked the sixth straight weekly drop.
The euro was down 0.2% against the dollar at $1.0793.
The Australian dollar fell sharply after data showed the country shed jobs in April at the fastest pace on record, suggesting more monetary and fiscal easing may be needed to support the economy. The Aussie dollar was last down 0.4% at US$0.6430.
The pound also tumbled below the $1.22 line for the first time in more than five weeks after Wednesday's data showed Britain's economy shrank by a record 5.8% in March as the coronavirus crisis escalated.