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LONDON – The dollar remained above a week-long low against major peers on Friday, taking a breather after its biggest drop in nearly a month overnight, as questions lingered about the fate of real estate developer China Evergrande. Group.
The yen fell to its weakest level since mid-August, as Treasury bond yields rose to their highest level since early July.
The dollar index, which measures the dollar against a basket of six rivals, rose 0.08% to 93.175 after falling 0.36% on Thursday and hitting the lowest level since Sept. 17 at 92.977. That erased the gains for the week and set the index for a 0.09% drop.
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The safe-haven dollar suffered after Beijing injected new cash into the financial system on Thursday, when Evergrande announced it would pay interest on a bond on land.
However, some holders of their offshore bonds said they had not received coupon payments before Thursday’s deadline. More dollar bond interest is due next week.
The dollar rose 0.16% to 110.57 yen for the first time since Aug. 11, as benchmark U.S. Treasury yields rose to 1.452% in Tokyo, a level not seen since Aug. 2. July. The last time the yields were quoted at 1.4320%.
Aggressive comments from the Bank of England (BOE) on Thursday boosted yields globally, a day after the US Federal Reserve said it could start cutting its monthly bond purchases in November, and that rates Interest could rise faster than expected for the next one. year.
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The BOE said that two of its policy makers had voted for an early end to buying government bonds in the pandemic era and markets advanced their expectations of an interest rate hike until March.
“The fate of Evergrande remains uncertain, but markets are now less concerned about any potential systemic shocks, leaving room for risk assets to recover,” ING’s Francesco Pesole and Chris Turner said in a morning note to clients.
“The improvement in sentiment has hit the dollar, which is also discounting the reluctance of markets to align with the Fed’s dot chart.”
The British pound was little changed at $ 1.3717 after rising to $ 1.3750 overnight for the first time since Sept. 20.
The euro also remained virtually flat at $ 1.1738, after recovering from a more than one-month low of $ 1.16835 reached Thursday.
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The risk-sensitive Australian dollar was down 0.2% to $ 0.7280 after hitting a one-week high of $ 0.73165.
Westpac expects the dollar index to stabilize at a slightly higher level by the end of the year, but will remain in the 92.0-93.5 range in the short term.
“The clear signal of the Fed downsizing and the gradual advance of rate takeoff plans, not to mention the ongoing uncertainty around Evergrande, should contain the downside,” Westpac strategists wrote in a report.
Meanwhile, the National Australia Bank said it would take a sharp drop in dollar sentiment to reach 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 on Friday, including Chairman Jerome Powell, who delivers a keynote address at a Fed roster event.
(Report by Ritvik Carvalho; additional report by Kevin Buckland in Tokyo, Timothy Heritage edition)
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