Dollar hovers above one-week low as Evergrande questions persist

Dollar hovers above one-week low as Evergrande questions persist
Dollar hovers above one-week low as Evergrande questions persist
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo

By Ritvik Carvalho

LONDON (Reuters) – The dollar hovered above a one-week low versus major peers on Friday, taking a breather after its biggest drop in almost a month overnight, as questions lingered about the fate of property developer China Evergrande Group.

The yen fell to its weakest since mid-August as Treasury yields pushed to the highest since the start of July.

The , which measures the greenback against a basket of six rivals, rose 0.08% to 93.175 after sliding 0.36% on Thursday and touching the lowest since Sept. 17 at 92.977. That erased gains for the week, and set the index up for a 0.09% decline.

The safe-haven dollar was hurt after Beijing injected new cash into the financial system on Thursday, when Evergrande announced it would make interest payments on an onshore bond.

However, some holders of its offshore bonds said they had not received coupon payments by a Thursday deadline. More dollar bond interest is due next week.

The dollar gained 0.16% to 110.57 yen for the first time since Aug. 11 as benchmark U.S. Treasury yields climbed as high as 1.452% in Tokyo, a level not seen since July 2. Yields last traded at 1.4320%.

Hawkish comments from the Bank of England (BOE) on Thursday pushed up yields globally, a day after the U.S. Federal Reserve said it could start reducing its monthly bond purchases by as soon as November, and that interest rates could rise quicker than expected by next year.

The BOE said two of its policymakers had voted for an early end to pandemic-era government bond-buying and markets brought forward their expectations for an interest rate rise to March.

“Evergrande’s fate remains uncertain, but markets are now less concerned about any potential systemic impact, leaving room for risk assets to rally,” said ING’s Francesco Pesole and Chris Turner in a morning note to clients.

“Improved sentiment has weighed on the dollar, which is also discounting markets’ reluctance to align with the Fed’s Dot Plot.”

Sterling was little changed at $1.3717 after rising as far as $1.3750 overnight for the first time since Sept. 20.

The euro was also mostly flat at $1.1738, after recovering from a more than one-month low of $1.16835 reached on Thursday.

The risk-sensitive Australian dollar was 0.2% lower at $0.7280 after touching a one-week high of $0.73165.

Westpac sees the dollar index flat to slightly higher into the end of the year, but keeping to a 92.0-93.5 range in the near term.

“The Fed’s clear taper signal and inching forward of rate lift-off plans, not to mention ongoing uncertainty around Evergrande, should contain the downside,” Westpac strategists wrote in a report.

Meanwhile, National Australia Bank (OTC:) said a sharp decline in dollar sentiment would be needed to hit its year-end target of 89.6 for the dollar index, “and there are no obvious short-term triggers” for that, strategists wrote in a research note.

Several Fed officials are due to speak on Friday, including Chair Jerome Powell, who gives opening remarks at a Fed Listens event.

Leave a Reply

Your email address will not be published.

New Brokers
2.8 rating
Buy & sell Crypto in minutes
3.0 rating
Note: Investing involves risks. You can lose your deposit. We advise you to only invest in financial products which match your knowledge and experience.
2.0 rating
Interactive Brokers attracts active traders with low per-share pricing, an advanced trading platform.
4.3 rating
eToro is the world’s leading social trading platform, with thousands of options for traders and investors.
AdonFinance
Risk Warning: The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory or other services by AdonFinance. In addition, the content of the website offers no opinion with respect to the suitability of any security or any specific investment. Trading foreign exchange, stocks, cryptocurrencies and commodities is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against traders. Before any investment with any broker you need to carefully consider your targets, previous experience, and risk level. Forex trading can result in the loss of your money, as a result, you are expressly cautioned that you should never invest or trade with money that you cannot afford to lose. For the avoidance of doubt, AdonFinance's service provides Brokers reviews in the Financial market. AdonFinance, its subsidiaries, agents or affiliates will assume no responsibility whatsoever for your trading activity. © Copyright 2021 AdonFinance