Dollar gains on safe-haven flows after China’s COVID protests

Dollar gains on safe-haven flows after China’s COVID protests
Dollar gains on safe-haven flows after China's COVID protests
© Reuters

By Peter Nurse – The U.S. dollar traded higher in Europe early Monday, and the Chinese yuan slumped to a two-week low as protests against the Chinese government’s mobility restrictions to combat surging COVID cases prompted safe haven flows.

At 02:50 ET (07:50 GMT), the , which tracks the greenback against a basket of six other currencies, rose 0.1% to 106.055, climbing away from the three-month low of 105.30 hit last week.

China posted another record high COVID-19 infections on Monday, and the extent of the country’s restrictive mobility curbs prompted a series of protests in a number of cities, with large swathes of the population showing their frustration that these restrictions were still in place three years after the original outbreak.

These rare protests raised worries about the viability of China’s zero-COVID policy and its impact on the world’s second-largest economy, pushing up 0.3% to 7.1963, at a two-week high.

While the U.S. dollar has traded higher Monday, its gains have been held back by growing that the will hike interest rates by a smaller degree in the coming months.

With this in mind, attention will focus on Friday’s U.S. for November as traders look for signs that the U.S. economy is struggling under the weight of this year’s aggressive interest rate rises.

It will be the last nonfarm payrolls report before the Fed’s final meeting of the year in December, and economists are expecting the U.S. economy to have added 200,000 new jobs, in what would be the smallest increase since December 2020.

Additionally, Fed Chair is to discuss the economic outlook on Wednesday, while St. Louis Fed President and New York Fed President are both due to speak later Monday.

fell 0.1% to 1.0383, ahead of a speech by ECB President to the European Parliament, later in the session.

Traders will be looking for clues as to whether the will continue with a 75-basis-point rate increase in December, given traded above 10% in October, or whether a hike of 50 basis points is more appropriate as the region heads into recession.

fell 0.2% to 1.2073, retreating from the three-month high of 1.2153 seen late last week, while the risk-sensitive slumped 0.9% to 0.6686, with slowing Chinese growth likely to hit demand for Australia’s raw materials.

fell 0.7% to 138.13, with the Japanese yen helped by market expectations of a less hawkish Federal Reserve, while inflation in Japan’s capital, Tokyo, rose more than expected to a 40-year high in November, data showed on Friday.

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