By Yasin Ebrahim
Investing.com – The dollar surged to a more than a three-year high on Wednesday, helped by a massive slump in the pound and a surge in demand for the greenback as investors rack up cash amid fears about a deep recession in the global economy, led by the coronavirus pandemic.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 2.08% to 101.65, its highest level since March 2017.
The rise in the dollar comes as traders have been liquidated positions, making a dash for cash, with the dollar, in particular – being the world's reserve currency – in high demand.
"When you have the most unexpected recession we’ve seen in modern times, a lot of people are caught in dollar-funding issues," said Paul Meggyesi, head of FX strategy at JPMorgan (NYSE:JPM) in London. "This crisis is affecting every sector and every country in a synchronised way."
GBP/USD fell to 4.01% to $1.1546.
The pound's slump comes as various headwinds gave prompted investors to head for exits, including the U.K.'s large current account deficit, the economy's reliance on services and the looming prospect of a no-deal Brexit, according to CIBC analyst Jeremy Stretch.