US dollar benefits from safe haven status amid crises in Turkey and on the Suez Canal

Mon 29 Mar 2021
Posted by: William Barns-Graham


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In another busy week for FX markets, the US dollar benefitted from its ‘safe haven’ status amid crises in Turkey and on the Suez Canal.

The US also recorded a jobless claims figure of 684,000 for the week before last – the first reading below 700,000 since the pandemic sparked mass layoffs last year. This further boosted the dollar in one of its better recent weeks.

Turkey crisis

Last week started with news that Turkey’s President Recep Erdogan had sacked the country’s Central Bank governor Naci Agdal for raising interest rates to check inflation and to support the Turkish lira. He was the third Central Bank chief to be sacked since 2019.

 The removal of Agdal from office led to “risk-off” dollar buying as the value of the lira against the dollar fell by approximately 12%.

Suez Canal blockage impact

Headlines have also been dominated by the MV Ever Given – a 400-metre, 200,000-tonne cargo ship that got stuck across the Suez Canal. 

With roughly 250 ships stacked on either side of the blockage and a reported $15bn worth of goods on board, there were worries that disrupted trade flows could disrupt international recoveries from the Covid-19 pandemic.

Dollar gains

The two crises played into the hands of the US dollar which made gains against all the major currencies.

The euro began last week valued as high as €1.195 before the dollar strength pushed rates to lows on Friday of around €1.177. The euro is now 5% lower against the US dollar compared to 6 January.

Topsy-turvy pound

Bets that Britain’s rapid vaccination drive would lead to a faster reopening of its economy propelled the pound to a high of US$1.424 in February.

Early last week, with fears of the EU banning Covid-19 vaccine exports to Britain, the pound suffered against the dollar. Opening on Monday at $1.388, it dropped to a low of $1.367 on Thursday morning.

Midweek UK inflation figures were lower than expected, which also weakened the value of the pound.

However, Friday’s retail data showed sales up 2.1% after a sharp contraction the previous month. With the EU vaccine row easing a bit, the pound returned from previous lows to close the week just above $1.38.

Volatile against the euro

It was also a volatile week for Sterling against the euro, largely due to the ongoing vaccine dispute.

Starting the week just over €1.17, the pound fell to a low of €1.156 midweek, before recovering and finishing the week back near the €1.17 mark.

The week ahead

As well as the expected data releases (below), the markets will be keenly watching for updates regarding vaccine and infection rates.

Economic data

Highlights this week include:

Today (22 March)

  • UK mortgage approvals data


  • GB consumer credit 
  • German inflation data


  • UK GDP
  • German unemployment
  • Eurozone Consumer Price Index


  • US manufacturing PMIs