The dollar drifts at the start of the week
Currencies don’t sleep in Singapore
Currency markets limped out in New York on Friday, with rising US yields reversing the initial losses of the US dollar and leading most majors to a near unchanged close. The dollar index rose 0.21% to 92.28, declining slightly to 92.24 in directionless Asian trading with the index stuck in a range of 92.00 to 92.50.
EUR / USD is unchanged at 1.1722 today and its key levels at 1.1680 and 1.1660 below and 1.1750 above. GBP / USD is also unchanged from Friday at 1.3675 as its rally on Friday falters past resistance at 1.3750. With the news that the government is considering enlisting the military in the fuel delivery business, the UK’s energy woes are likely to cap sterling earnings. Failure of critical support at 1.3610 potentially signals a further drop of 300 points. USD / JPY climbed 0.35% to 110.70 on Friday before falling to 110.55 in Asia today. USD / JPY remains a yield differential game, ignoring policy in Japan. If US yields strengthen again this week, USD / JPY could test resistance at 110.80, signaling further gains at 111.70 initially.
Rising commodity prices, fading Evergrande fears and plans to reopen the state pushed the AUD / USD up 0.35% to 0.7285 today, after it and NZD / USD fell 0.80% on Friday as indicators of risk. Because of this, the two poles remain extremely vulnerable to increased selling pressure if news from China takes a different turn for the worse. As such, both likely remain selling rallies for the first few days of this week and certainly if Thursday’s PMI data from China is very weak.
Another neutral fix in USD / CNY and an injection of liquidity by the PBOC left Asian currencies free to follow improving risk sentiment. This has seen regional currencies recover in all areas against the US dollar today. The USD / KRW fell 0.35% to 1,175.80, the USD / CNY 0.10% to 6.4590 while the Indonesian rupiah, Malaysian ringgit, Thai baht and Singapore dollar fell. all recorded small gains. Like the Australian and New Zealand dollars, Asian currencies will shift to shades of fear aversion levels this week. Negative developments on Evergrande could quickly wipe out today’s gains.
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