Dollar wobbles lower as China growth hopes lift Aussie

The US dollar index fell 0.1 per cent to 102.790, about 2 per cent beneath a two-decade high of 105.010 made earlier in May.— Reuters pic

The US dollar index fell 0.1 per cent to 102.790, about 2 per cent beneath a two-decade high of 105.010 made earlier in May.— Reuters pic

Monday, 23 May 2022 9:08 AM MYT

SINGAPORE, May 23 — The dollar began the week on the back foot, following its first weekly loss in nearly two months, as investors cut bets on further dollar gains from rising US rates and turned hopeful that loosening lockdowns in China can help global growth.

US stock market futures bounced sharply in early Asia trade and pulled the risk-sensitive Australian and New Zealand dollars along for the ride.

The Aussie was last up 0.4 per cent at US$0.7080 (RM3.11) and has lifted 3.8 per cent in a week and a half. The kiwi rose 0.6 per cent to US$0.6450, a three-week high.

“It’s a reasonably positive start to the week,” said National Australia Bank’s head of foreign exchange strategy, Ray Attrill.

“We did have a sharp reversal of US equity market weakness in the last hour or so on Friday, so maybe there’s some momentum there,” he added. “The US dollar looks, for the time being, to be losing upside momentum.” The euro and yen rose, with the yen up 0.1 per cent to 127.83 per dollar and the euro up 0.2 per cent at US$1.0586 following last week’s 1.5 per cent gain on the dollar.

The US dollar index fell 0.1 per cent to 102.790, about 2 per cent beneath a two-decade high of 105.010 made earlier in May.

“The dollar may be carving out a peak, given Europe’s resilience to the energy shock and potential easing of lockdowns in China,” said Commonwealth Bank of Australia strategist Joe Capurso.

“Given the type of policy support, we expect investment to rebound faster than consumer spending,” he said. “Investment is mining commodity-intensive (and therefore) very positive for commodity currencies such as the Australian dollar and Canadian dollar, in addition to the yuan.”

China hope

Shanghai is edging out of lockdown and an unexpectedly big rate cut in China last week has been taken a signal that authorities are going to provide support to a recovery.

The city of 25 million expects to lift its city-wide lockdown and return to more normal life from June 1. The yuan had its best week since late 2020 last week and firmed to 6.6861 per dollar in offshore trade early today.

The Canadian dollar rose for a third straight week last week and was a touch higher at CUS$1.2814 per dollar early today. Sterling leapt nearly 2 per cent last week on the back of stronger-than-expected retail data and markets’ broader re-think on whether global central banks are really lagging much behind the Federal Reserve. It was last up 0.3 per cent at US$1.2527. Geopolitics are in focus in Asia this week as US President Joe Biden tours the region, promoting greater US economic engagement and seeking to push back against China’s influence.

He meets Japan’s Emperor todayahead of talks with Prime Minister Fumio Kishida.

Australia elected a new government on Saturday, though the market reaction was muted as polls had predicted victory for the centre-left Labour Party and it is not expected to shift the direction or pace of interest rate rises.

The Reserve Bank of New Zealand is expected to lift its benchmark cash rate by 50 basis points on Wednesday. US Federal Reserve meeting minutes are also due on Wednesday. — Reuters