SINGAPORE — The dollar slid across the
board on Monday as traders piled into riskier assets after more
Chinese cities eased some of their COVID related restrictions,
stoking hopes of an eventual reopening of the world’s second
Financial hub Shanghai and Urumqi in the far west were among
the cities that announced an easing of coronavirus curbs over
the weekend following recent, unprecedented protests against the
government’s uncompromising “dynamic zero-COVID” strategy.
“It may seem like they are baby steps but nonetheless quite
a strong sign of China taking calibrated steps in the direction
of reopening,” said Christopher Wong, a currency strategist at
OCBC in Singapore.
China is soon set to announce a nationwide easing of testing
requirements as well as allowing positive cases and close
contacts to isolate at home under certain conditions, people
familiar with the matter told Reuters last week.
The dollar weakened below 7.0 yuan in offshore trade,
while the onshore yuan jumped roughly 1.4% to as high
as 6.9507 on Monday morning, its strongest since Sept. 13.
The dollar index, which measures the currency against
six major peers including the yen and euro, was down 0.268% at
104.19, its lowest since June 28.
The index fell 1.4% last week, and 5% in November, making
for its worst month since 2010. The recent bearishness toward
the dollar had largely stemmed from expectations that the
Federal Reserve is set to dial down the pace of its interest
rate hikes after four consecutive 75 basis points increases.
Investors’ focus will be on U.S. consumer price inflation
data due out on Dec. 13, one day before the Fed concludes its
two-day policy meeting.
The U.S. central bank is expected to increase policy rates
by an additional 50 basis points at the meeting. Fed funds
futures traders are now pricing for the Fed’s benchmark rate to
peak at 4.92% in May.
OCBC’s Wong said some degree of caution is still warranted
as the Fed is not done tightening. “They are still tightening,
it’s just that it is going to be in small steps.”
Meanwhile, the Japanese yen weakened 0.20% versus
the greenback to 134.59 per dollar, having gained 3.5% last
week, far off October’s low of 151.94.
The yen’s ascent comes at a time when the spotlight has been
on the drawbacks of prolonged monetary easing policy and ahead
of a Bank of Japan leadership transition when governor Haruhiko
Kuroda, regarded as a policty dove, ends his second term.
The BOJ should conduct a review of monetary policy framework
and tweak its massive stimulus program depending on the
outcome, its board member Naoki Tamura told the Asahi daily.
“You got a case of not just the Fed slowing its pace of
policy tightening but you also have the case of potential BOJ
unwinding, maybe very early stage, some of its very
accommodative policy,” Wong said.
“The two forces coming from both sides can give the
dollar/yen a bit more downside … there is still room for
dollar/yen to test lower.”
The euro rose 0.32% to $1.0572, having gained 1.3%
last week. It had earlier touched a more than five month high of
Sterling rose to $1.23450, its highest since June 17,
and was last trading at $1.2327, up 0.33% on the day
The Australian dollar was up 0.59% at $0.683, while
the kiwi was 0.31% higher at $0.643.
Currency bid prices at 0634 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar $1.0575 $1.0541 +0.32% -6.98% +1.0585 +1.0512
Dollar/Yen 134.5400 134.2950 +0.20% +16.99% +134.7600 +134.2800
Dollar/Swiss 0.9350 0.9368 -0.17% +2.53% +0.9393 +0.9344
Sterling/Dollar 1.2329 1.2293 +0.28% -8.84% +1.2343 +1.2251
Dollar/Canadian 1.3411 1.3474 -0.45% +6.08% +1.3473 +1.3386
Aussie/Dollar 0.6832 0.6794 +0.55% -6.02% +0.6851 +0.6764
NZ 0.6430 0.6413 +0.23% -6.09% +0.6442 +0.6367
Tokyo Forex market info from BOJ
(Reporting by Ankur Banerjee in Singapore; Editing by Stephen
Coates & Simon Cameron-Moore)