The dollar rebounded on Wednesday as investors were drawn to its safe-haven appeal a day after news of the launch of a formal impeachment inquiry against US President Donald Trump drove a sharp move lower in risky assets.
Increased political uncertainty and lingering worries about the state of the trade talks between Washington and Beijing at a time when global economic growth is slowing worked in favor of the US currency on Wednesday.
The greenback is viewed as safe-haven due to its standing as the world's reserve currency. "I think that overall the dollar's safe haven status is understood," said Juan Perez, senior currency trader at Tempus Inc in Washington.
The dollar index, which measures the US currency against six major currencies, was up 0.6%. On Tuesday, the index had slipped 0.3% to finish the session at 98.337.
Adam Cole, a currency analyst at RBC Capital Markets, said the immediate reaction to sell the dollar was questionable. The dollar was also benefiting from a sharp pull pack for the British pound amid worries that Brexit and general election related risks showed no signs of going away soon.
The euro, which has been dogged by worries about the dismal state of the euro zone economy, shed 0.5% on Wednesday.
The pound fell about 1% on Wednesday against the dollar, ceding gains made the previous day after the Supreme Court's ruling against Prime Minister Boris Johnson, as investors priced many more months of Brexit and general election risk.
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