Evergrande Nerves Weigh on Offshore Yuan, Dollar Edges Up on Safety Bid

Market sentiment has been rattled by the potential contagion from Evergrande, which is trying to raise funds to pay a host of lenders, suppliers and investors. A deadline for an $83.5 million interest payment on one of its bonds is due on Thursday, and the company has $305 billion in liabilities.

On Thursday, the yuan strengthened to its highest level in three months at 6.4226 per dollar before starting to reverse as Evergrande’s woes worsened. The move sharpened on Monday after warnings from Chinese regulators that the company’s insolvency could fuel broader risks in the country’s financial system if not stabilized.

Analysts at Wells Fargo said on Monday they expect the dollar to reach 6.60 per yuan within the next month. The offshore Chinese yuan last weakened versus the greenback at 6.4839 per dollar.

“We are seeing a classic flight to safety in the dollar until we get some sense of clarity on whether or not it is going to be an orderly or disorderly resolution to Evergrande,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington DC.

“We were likely to see a continuation of the decline we’ve seen in risk assets going into this week and you throw in Evergrande and it has really unsettled the markets.”

The dollar and other safe-haven currencies such as the yen and Swiss franc gained with the risk-off sentiment, which saw Wall Street’s S&P 500 index on pace for its biggest one-day percentage drop 11 months.

The dollar index rose 0.025%, with the euro unchanged at $1.1725.

The dollar has also been gaining ground on expectations the Federal Reserve will begin reducing its monthly bond purchases this year, with the central bank’s policy announcement due on Wednesday.

Aside from the Fed, multiple central banks around the globe will hold policy meetings this week, including those of Sweden, England, and Norway.

The Japanese yen strengthened 0.58% versus the greenback at 109.32 per dollar, while sterling was last trading at $1.3656, down 0.63% on the day.

The Canadian dollar, also a commodity currency that correlates with risk sentiment, weakened to as low as C$1.2895 per dollar, its lowest level in four weeks. It last fell 0.42% versus the greenback at C$1.28 per dollar.

Polling for Monday’s national election in Canada points to an advantage for incumbent Prime Minister Justin Trudeau, but he is unlikely to gain a parliamentary majority.

In cryptocurrencies, bitcoin last fell 7.76% to $43,577.67.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Bernadette Baum and Cynthia Osterman)

U.S Dollar Bulls Take Charge on Impressive U.S Private Payrolls Report

The greenback rebounded strongly at America’s trading session, heading for its biggest monthly jump since November 2016 by an impressive U.S private payrolls report and a hawkish shift by the U.S. Federal Reserve’s rates outlook at a meeting held early in June.

DXY bulls are also increasingly gathering momentum amid growing concerns over the spread of the Delta virus variant.

The greenback has already posted gains of about 3% in June against a basket of major currencies that include the Euro, Japanese yen, Pound sterling, Canadian dollar, Swedish krona, and Swiss franc partly in the wake of a hawkish U.S Federal Reserve Bank

All eyes are now on Friday’s U.S. Nonfarm Payrolls report for an affirmation of a shift in America’s monetary policy.

Recent macros show U.S. private payrolls surged by more than expected this month by 692,000 jobs.

Though DXY bulls gains got capped around the 92.433 index points on the account that U.S private farm payrolls for the month of May was earlier revised lower to reveal 886,000 jobs added instead of the previously reported 978,000.

Still, some market pundits had earlier predicted private payrolls would rise by 600,000 jobs, further giving DXY bulls enough gas to break temporarily above 92.4 index points.

Consequently, present chart patterns show the greenback continues to consolidate its post-FOMC gains, with the rampaging COVID-19 mutants providing some safe-haven support.

DXY bulls are also riding the price wagon high after recent fundamentals showed U.S. consumer confidence increased this month to its highest level since the pandemic started over a year ago. Such narrative lifted market sentiments on the safe haven currency positively amid expectations for stronger economic growth in the mid-term.

Though some technical indicators pre-empt currency markets might be quite choppy in the coming days amid this month and quarter-end rebalancing flows.

For a look at all of today’s economic events, check out our economic calendar.

Dollar Slides to Multi-Month Lows as Fed Rate Hike Fears Fade

By Stephen Culp

U.S. Treasury yields stalled as market participants grew increasingly confident that the Federal Reserve will hold off on hiking interest rates for the time being, despite worrisome near-term inflation spikes.

“We’re seeing this dollar weakness against numerous pairs and the market is starting to believe the Fed that we’re going to have low interest rates a lot longer,” said Edward Moya, senior market analyst at OANDA in New York.

“That’s going to be bearish for the dollar. You’ll eventually see commodity-based currencies outperforming,” Moya added.

A spate of Fed policymakers are expected to speak this week and the U.S. central bank is due to release the minutes from its April policy meeting on Wednesday, which will be parsed for any signs of a shift in its economic outlook and monetary policy.

“Normally everyone gets excited for the Fed minutes, but these minutes are old,” Moya said. “We had a disappointing payrolls report and very hot CPI and PPI that happened after the meeting, most are focused on the raft of (Fed) speakers.”

The dollar index was last down 0.41% at 89.799.

The progress of COVID-19 vaccine deployment and easing of measures to contain the pandemic has lifted higher-risk currencies that stand to benefit most from economic revival.

For an interactive graphic on worldwide vaccine rollout and access, click here https://graphics.reuters.com/world-coronavirus-tracker-and-maps/vaccination-rollout-and-access.

The euro gained 0.51% to $1.2214, passing its highest level since Feb. 25, and the dollar fell 0.24% to 108.935 Japanese yen.

The British pound, buoyed by the lifting of COVID-19 restrictions, rose past the $1.42 level for the first time since Feb. 24. [GBP/]

“What really has helped the pound is reopening momentum and willingness to become vaccinated,” Moya said. “It’s suggesting (the UK) recovery is going to stick. They’re finally getting on the other side of Brexit.”

Rising oil prices supported the Norwegian crown and helped boost the Canadian dollar to a six-year high. [O/R]

Bitcoin edged higher but remained near the three-month low it hit after Tesla Inc boss Elon Musk dampened enthusiasm for the cryptocurrency over the weekend.

Rival digital currency ether jumped 3.62% to $3,404.

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Currency bid prices at 9:47AM (1347 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

89.7990 90.1840 -0.41% -0.202% +90.2040 +89.6890

Euro/Dollar

$1.2214 $1.2152 +0.51% -0.03% +$1.2234 +$1.2153

Dollar/Yen

108.9350 109.1750 -0.24% +5.44% +109.2750 +108.8550

Euro/Yen

133.04 132.73 +0.23% +4.83% +133.1600 +132.7000

Dollar/Swiss

0.8969 0.9033 -0.70% +1.38% +0.9035 +0.8961

Sterling/Dollar

$1.4199 $1.4139 +0.43% +3.94% +$1.4220 +$1.4135

Dollar/Canadian

1.2043 1.2068 -0.19% -5.41% +1.2071 +1.2014

Aussie/Dollar

$0.7795 $0.7770 +0.31% +1.31% +$0.7813 +$0.7765

Euro/Swiss

1.0952 1.0974 -0.20% +1.34% +1.0982 +1.0954

Euro/Sterling

0.8600 0.8593 +0.08% -3.77% +0.8609 +0.8582

NZ

Dollar/Dollar $0.7253 $0.7216 +0.51% +1.00% +$0.7271 +$0.7211

Dollar/Norway

8.1985 8.2570 -0.73% -4.55% +8.2580 +8.1795

Euro/Norway

10.0120 10.0345 -0.22% -4.35% +10.0530 +10.0019

Dollar/Sweden

8.2855 8.3285 -0.01% +1.09% +8.3434 +8.2750

Euro/Sweden

10.1219 10.1225 -0.01% +0.45% +10.1486 +10.1170

(Reporting by Stephen Culp; Additional reporting by Ritvik Carvalho; Editing by Paul Simao)