October 4, 2023

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Dollar slips as easing curbs in China buoys risk sentiment

Reuters

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SINGAPORE — The dollar slid across the

board on Monday after a bruising week, weakening to below 7 yuan

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as sentiment toward riskier, non-dollar assets improved

following signs of China easing some of COVID related

restrictions.

More Chinese cities, including financial hub Shanghai and

Urumqi in the far west, announced an easing of coronavirus curbs

over the weekend as China tries to soften its stance on COVID-19

restrictions in the wake of unprecedented protests against the

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policy.

“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.

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 slipped under 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 0.18% at

104.28, its lowest since June 28.

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The index fell 1.4% last week, capping off 5% drop for the

month of November, its worst month since 2010, due to increasing

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,

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it’s just that it is going to be in small steps.”

Traders appeared to look past stronger-than-anticipated U.S.

payrolls report for November on Friday after some of the Fed

speakers allayed market concerns.

“We move past U.S. payrolls with only a momentary shake for

risky markets,” said Chris Weston, head of research at

Pepperstone, noting that the data supported the ‘soft landing’

argument and is unlikely to change the Fed’s course.

Meanwhile, the Japanese yen weakened 0.04% versus

the greenback at 134.37 per dollar, having gained 3.5% last

week, far off October’s low of 151.94.

The euro rose 0.38% to $1.0578, having gained 1.3%

last week. It had earlier touched a more than five month high of

$1.05835.

Sterling rose to $1.23450, its highest since June 17,

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and was last trading at $1.2339, up 0.42%.

The Australian dollar rose 0.75% to $0.684, while

the kiwi was 0.31% higher at $0.643.

========================================================

Currency bid prices at 0520 GMT

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

Previous Change

Session

Euro/Dollar $1.0580 $1.0541 +0.37% -6.94% +1.0584 +1.0512

Dollar/Yen 134.3800 134.2950 +0.00% +16.75% +134.7600 +134.2800

Euro/Yen

Dollar/Swiss 0.9349 0.9368 -0.19% +2.51% +0.9393 +0.9344

Sterling/Dollar 1.2337 1.2293 +0.37% -8.76% +1.2343 +1.2251

Dollar/Canadian 1.3401 1.3474 -0.54% +5.99% +1.3473 +1.3386

Aussie/Dollar 0.6841 0.6794 +0.63% -5.94% +0.6851 +0.6764

NZ 0.6429 0.6413 +0.27% -6.06% +0.6442 +0.6367

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Ankur Banerjee in Singapore; Editing by Stephen

Coates & Simon Cameron-Moore)

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