LONDON – The risk-sensitive Australian dollar rose and the safe-haven yen fell to a near three-month low on Monday as fears of a transition from indebted China Evergrande Group to the broader market eased.
Rising commodity prices also helped the Australian and Norwegian crowns, while the yen was put under pressure as higher US yields attracted money from Japanese investors.
The euro traded little changed at $1.17205, largely ignoring developments in German elections over the weekend, with the Social Democrats projected to narrowly defeat the CDU/CSU conservative bloc.
The dollar index, which measures the US currency against six major rivals, was trading at 93.40 in the middle of its range last week.
“Looks like it’s a continuation of last week, high-beta is performing well, havens at the back of the pack, the FX market is really only after the sentiment correction that we’ve seen more broadly – stocks in two weeks.” “Run, and yields are rising fairly quickly,” said Michael Brown, senior market analyst at Caxton FX.
After the Federal Reserve announced last week that it could begin easing stimulus as soon as November and flagged interest rate hikes could happen sooner than expected, early July in anticipation of tighter US monetary policy. US yields climbed to their highest level since.
“The more aggressive FOMC of the USD is likely to be mired in fading concerns around the cross-current and potential Evergrande default,” Commonwealth Bank of Australia analysts wrote in a client note.
“Still, the risk is skewed to a stronger USD,” with any renewed Evergrande concerns unlikely to trigger the level of volatility in the market over the past week, he said.
Concerns that Evergrande, China’s second-largest developer, could default on its $305 billion of debt, have weighed on business in recent weeks, but fears of some of those contagions are waning.
The yen weakened to 110.81 per dollar, matching the low on July 7, before strengthening slightly from late last week at 110.645.
This was followed by a move in the benchmark 10-year US Treasury yield, which touched 1.4660 per cent for the second day on Monday, the highest since July 2, before falling back to 1.4527 per cent.
“The correlation between US bond yields and USDJPY has increased,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.
“USDJPY looks a bit stretched, so I would be wary of chasing here, but I am looking for a retest of 110.50 as a potential support area, which is a progressively bullish trend.”
The Australian rose 0.37 percent to $0.72835 from $0.72205 a week ago, its lowest level since August 24.
The Norwegian crown rose nearly 0.4 percent and touched 8.5493 per dollar for the first time since July 6.
The Canadian dollar rose nearly 0.3 percent to C$1.2622 per greenback.
Those gains come as Brent crude advanced for the fifth day, closing at $80 a barrel, while iron ore, copper and other industrial metals rose.
Central Bank Speakers will be in focus this week, with Fed Chair Jerome Powell joining Treasury Secretary Janet Yellen in speaking to Congress on Tuesday.
The European Central Bank hosts an annual forum on Tuesday and Wednesday, with not only ECB President Christine Lagarde to speak on the first day, but Powell, along with Bank of Japan Governor Haruhiko Kuroda and Bank of England Governor Andrew on the second. Days engage in panel discussions. Bailey.
($1 = 6.4662 Chinese Yuan Renminbi)
by Ritwik Carvalho
This News Originally From – The Epoch Times