The US dollar gained in early European trade Monday, as worries that the escalating COVID situation in China would stunt the global economic recovery prompted safe haven flows.
At 03:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.5% to 107.365, near its highest level since November 11.
Several Chinese cities saw a record spike in new COVID-19 cases over the weekend, while the country saw its first COVID-related death in almost six months on Saturday and another two were reported on Sunday.
The rising infections saw the introduction of new lockdowns in several financial hubs, including the capital Beijing and economic center Shanghai, raising fears that economic activity would be severely impacted in the world's second largest economy and major regional growth driver.
USD/CNY rose 0.6% to 7.1643, with the yuan falling to a 10-day low.
Yet, despite these dollar gains, Goldman Sachs thinks the dollar's strength against Asian currencies may now be short-lived.
"Timing the peak of USD is not straightforward, but on balance, the USD will crest as and when there is more clarity on Fed terminal rates, around 3- to 6-months from now," Goldman analysts wrote, in a note Sunday.
The Federal Reserve is set to publish the minutes of its November meeting on Wednesday, and this could provide more clues over whether policymakers may now be considering slowing the tightening process.
EUR/USD fell 0.5% to 1.0272, near its lowest level since Nov. 14, after German producer prices fell unexpectedly on the month in October, falling 4.2% on the month, compared with expectations for a rise of 0.9%.
On an annual basis, prices rose 34.5%, below the expected 41.5%.
While this is welcome news, Eurozone consumer inflation soared past 10% on an annual basis at the end of last month, up from 9.9% in September, prompting European Central Bank President Christine Lagarde to hint at further interest rate hikes on Friday.
GBP/USD fell 0.5% to 1.1826, USD/JPY rose 0.3% to 140.80, while the risk-sensitive AUD/USD fell 0.5% to 0.6637.
The OECD will publish its latest forecasts for the global economy on Tuesday, providing a snapshot of the health of the world economy.
The group's most recent forecasts, made in September, already pointed to a worsening outlook for next year with the U.S. economy expected to fall into a recession.
