FOREX-Dollar Firm, Yuan Slips As China’s Evergrande Anxiety Resurfaces
Band Tom Westbrook
SINGAPORE, October 4 (Reuters) – The safe-haven dollar found support just below the peaks of last week on Monday as renewed concerns over the Chinese real estate sector and looming US employment data put investors in a cautious mood.
The greenback hit a 14-month high on the euro and a 19-month high on the yen last week as markets believed US interest rates could rise ahead of their global peers.
The euro EUR = EBS fell back below $ 1.16 and at $ 1.1598 is not far from last week’s low of $ 1.1563. Yen JPY = EBS was little changed at 111.065 to the dollar. The offshore yuan CNH = fell about 0.3%.
Actions in struggling developer China Evergrande 3333.HK were arrested in Hong Kong, rekindling market nerves over the possibility of contagion.
Evergrande said it has requested a halt in negotiations pending the announcement of a major transaction, while the Evergrande Property Services Group unit said the announcement constitutes “a possible general offer of shares in the company”.
Investors fear that a collapse in Evergrande could hurt an already fragile Chinese economy and dampen global growth. The US dollar index = USD edged up 0.08% to 94.029.
â(There is) a bit of nervousness,â said Moh Siong Sim, currency analyst at the Bank of Singapore, although most traders still think Evergrande’s systemic risk can be contained.
âIt’s part of the worry wall,â he said, that the market could possibly âgo upâ if the COVID backdrop improves, growth stabilizes and inflation fears subside, but which for now is keeping investor sentiment quite austere.
Besides Evergrande, a report released by CNBC on Friday that said U.S. Trade Representative Katherine Tai will announce on Monday that China does not comply with U.S.-China trade rules also supported the dollar, particularly against the yuan.
Chinese markets have been closed for a holiday.
Over the coming week, the Reserve Bank of Australia will meet on Tuesday and is expected to keep its policy stable. Across the Tasman, a 25 basis point hike by the Reserve Bank of New Zealand on Wednesday is expected.
Australian dollar AUD = D3 was roughly stable at $ 0.72685 and the New Zealand dollar NZD = D3 changed little at $ 0.6941.
On Friday, US employment data is expected to show continued improvement in the labor market, with a forecast of 460,000 jobs being created in September – enough to keep the Federal Reserve on track to start shrinking ahead of the end of the year.
“The question is whether there is a figure that changes the Fed’s view on cutting its bond purchases in November, and what a really low or hot figure means amid growing fears of stagflation, âsaid Chris Weston, head of research at Pepperstone.
“If US Treasuries find more buyers this week in Friday’s US non-farm payroll, the dollar could go on sale this week.”
Elsewhere, economists polled by Reuters expect the cash rate to be maintained in Australia until at least 2024, as the RBA has insisted it be.
Swap markets show a 97% chance of a New Zealand rate hike on Wednesday and a 96% chance of another in November. RBNZ WATCH
Meanwhile, the British pound, despite Friday’s gains, still suffers the losses from a steep decline last week as traders ignored hawkish central bank rhetoric to focus on a bitter outlook and upside risk. rates and inflation.
The pound GBP = D3 was roughly stable from last week at $ 1.3540.
âInvestors are judging the UK on all of its fundamentals and movements in the pound suggest that many don’t like what they see,â said Jane Foley, Rabobank strategist, as the currency wipes out early 2021 gains.
“The UK no longer has an advantage on the vaccine front … and, while Prime Minister (Boris) Johnson likes to think of Brexit as ‘over’, many companies and commentators are just starting to assess its impact. “
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(Reporting by Tom Westbrook. Additional reporting by Kevin Buckland. Editing by Shri Navaratnam)
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