Dollar gets a breathe over China opening hopes
The pound and the euro gained the ground they lost on Friday but they were set to suffer their largest weekly losses since September in advance of U.S. jobs data that could confirm the hawkish tone Fed Chair Jerome Powell delivered this week increasing the dollar.
The main reason for the increase was the improved investor mood after reports that China might ease its anti-COVID policies, which led to China’s currency strengthening rapidly.
The euro closed up 0.24 percent at $0.9772 after trading at 0.54 percent higher. The sterling was trading up 0.6 percent at $1.1228 and also slowed gains gained during earlier in the Asian session. (Dollar gets a breathe over China opening hopes.)
However, it was still a good week for the European Common Currency was forecast to experience a 1.9 percent drop during the week, while sterling was set for a 3.4 percent decline. Both their highest ever since September’s third week, the time when then finance minister Kwasi Kwarteng caused markets to spin by removing a set of fiscal policy.
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The dollar climbed all over the world this week, following Federal Reserve chair Jerome Powell on Wednesday suggesting that the central bank will continue to raise interest rates in the event that inflation doesn’t ease and markets are forced to invest at a higher rate in U.S. rates.(Dollar gets a breathe over China opening hopes.)
However, markets have taken a cautious view of officials’ comments on this week’s Bank of England rate increase on Thursday, and the European Central Bank’s latest week and Norway, Canada and Australia’s central banks have also surprised on the side of dovishness.
“There’s an increasing likelihood that there’s a chance that the Fed is the final big central bank that will abandon its stance and end the tightening process,” explained Francesco Pesole, FX strategist at ING. (Dollar gets a breathe over China opening hopes.)
“We believe this idea could give a very long-lasting boost to the dollar as we enter the new year.”
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U.S. payroll data released later this Friday will give the most current indicators of the state of the U.S. economy. An Reuters poll of economic experts revealed they were forecasting the creation of 200,000 new jobs for the month of October following the rise by 263,000 during September.(Dollar gets a breathe over China opening hopes.)
“An unexpected positive surprise to this data would strengthen the Fed’s more aggressive terminal rate and maintain in place the U.S. dollar bid, however, softer data could put pressure against the dollars,” said Christopher Wong, Currency expert at OCBC.
However, Friday’s data indicated that business activity in the eurozone slowed in the month of March at the fastest rate since the end of 2020.(Dollar gets a breathe over China opening hopes.)
Friday’s risk-on movement in currencies, as the share market and commodity markets, came after speculation in the media that China may ease restrictions on COVID that have hampered economic activity. [O/R] [MKTS/GLOB]
China’s foreign ministry spokesperson stated on Friday that he wasn’t aware of the report in the media.
The offshore yuan gained by more than 1% during the Asia session, reaching a one-week maximum that was 7.2441 per dollar. The last time it traded was 7.2689. [CNY/]
“The forex market can be the easiest barometer for analyzing China’s risk perception without becoming too complicated,” said Stephen Innes, the managing partner of SPI Asset Management.
“CNH (the currency exchanged offshore) will inform you whether investors are either cold or hot within China markets. In the typical scenario, this particular risk-on move as indicated by the yuan is likely to have an enticing effect on investors across the Asia market.” (Dollar gets a breathe over China opening hopes.)
The Australian dollar, which is also an indicator of sentiment toward China due to the two countries’ close trade relations and close trade ties, was up by nearly 1 percent at $0.6348 The dollar also fell over 0.5 percent against the oil-sensitive Canadian dollar as well as the Norwegian crown.(Dollar gets a breathe over China opening hopes.)
A higher level of U.S. rates also spells more trouble on the Japanese yen which is a victim of a widening of rates of interest due to The Bank of Japan’s non-dovishness.
The dollar closed down 0.42 percent to 147.62 the yen. Recent movements on the currency pair are less dramatic due to fears of any further intervention from Japanese authorities.(Dollar gets a breathe over China opening hopes.)