Ray V
SINGAPORE (Reuters) – The dollar weakened on Monday but held close to a two-year peak as traders await a set of U.S. economic data this week, headlined by the December non-farm payrolls report, for further clues about the outlook for Federal Reserve rates.
In Canada, Prime Minister Justin Trudeau is increasingly announcing his intention to resign, although he has not yet made a final decision, a source told Reuters. The Globe and Mail previously reported that Trudeau was expected to announce his resignation as early as Monday.
Markets appeared to have largely taken this into account and might welcome an election to clear the air, leaving the US dollar down 0.36% against its Canadian counterpart at C$1.4395.
Also in focus was the Chinese yuan, which fell above the psychological 7.3 per dollar level domestically for the first time in 14 months on Friday after the People’s Bank of China (PBOC) aggressively defended that key threshold for much of trading. December.
It fell to a 16-month low of 7.3289 per dollar, while its offshore counterpart rose 0.06% to 7.3558.
“The PBOC appears to have stopped defending that 7.30 level,” said Ray Attrill, head of FX strategy at National Australia Bank (OTC:) (NAB).
“It just brings a lot more attention to what the PBOC is doing in terms of fixing today and in the coming days, and whether they are now effectively allowing the dollar/yuan to trade in a higher trading range or not, because I am doing it.” . I think this will have implications for the broader currencies of Asia, as well as for and.”
Before the market opened on Monday, the PBOC set the average rate around which the yuan is allowed to trade in a 2% band at 7.1876 per dollar.
The Australian and New Zealand dollars, often used as liquid substitutes for the yuan, were largely unaffected by Friday’s decline in the Chinese currency as they both traded about 0.2% higher in the Asian session.
The Aussie last bought $0.6227, while the Kiwi was up 0.22% at $0.56245.
TRUMP AND BETS
In the broader market, investors kept a close eye on Friday’s US jobs report for further clarity on the health of the world’s largest economy.
A host of Fed policymakers are also due to speak this week, where they are likely to echo recent comments from their colleagues that the fight to tame inflation is not over.
The dollar continues to strengthen on expectations of smaller Fed rate cuts this year, and its rise to a two-year high last week pushed the euro to its lowest level in more than two years.
The single currency was last little changed at $1.0310, while the rate was slightly lower at 108.89.
Sterling rose 0.13% to $1.2440. The yen fell 0.24% to 157.66 per dollar.
The dollar was also further supported by uncertainty over US President-elect Donald Trump’s plans for huge import tariffs, tax cuts and immigration restrictions following his inauguration on January 20.
“There’s still huge uncertainty about the speed at which we’ll see policy announcements and how well the reality will live up to the rhetoric, so I think that leaves huge uncertainty in the markets,” NAB’s Attrill said.
“It’s very hard to see any harm coming to the US dollar… you’d have to be very brave to bet against the dollar continuing to strengthen at this point.”