LONDON, Sept 24 — The dollar hovered above a one-week low versus major peers today, 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 dollar index, which measures the greenback against a basket of six rivals, rose 0.08 per cent to 93.175 after sliding 0.36 per cent on Thursday and touching the lowest since September 17 at 92.977. That erased gains for the week, and set the index up for a 0.09 per cent 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 deadline yesterday. More dollar bond interest is due next week.
The dollar gained 0.16 per cent to 110.57 yen for the first time since August 11 as benchmark US Treasury yields climbed as high as 1.452 per cent in Tokyo, a level not seen since July 2. Yields last traded at 1.4320 per cent.
Hawkish comments from the Bank of England (BOE) yesterday pushed up yields globally, a day after the US 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 US$1.3717 (RM5.74) after rising as far as US$1.3750 overnight for the first time since September 20.
The euro was also mostly flat at US$1.1738, after recovering from a more than one-month low of US$1.16835 reached yesterday.
The risk-sensitive Australian dollar was 0.2 per cent lower at US$0.7280 after touching a one-week high of US$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 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 today, including Chair Jerome Powell, who gives opening remarks at a Fed Listens event. — Reuters
