U.S Dollar Moves Higher Monday Amid Concerns About China
The United States (U.S) dollar improved further on Monday due to risk aversion, as markets digested the sharp drop in the Chinese property markets and uncertainty about the unusually busy central bank meeting calendar this week.
Concerns that the possible failure of Chinese property developer Evergrande has fueled concerns that it will spread to the US real estate market and beyond.
The National Association of Home Builders’ monthly index released Monday morning indicated that shortages of supplies and skilled workers continued to put pressure on the housing sector.
The calendar is heavier on Tuesday, with further data on housing construction and the first look at services conditions for September as the highlights. However, the focus remains on Wednesday’s Federal Open Market Committee announcement.
The meeting is not expected to result in an announcement of an asset purchase tapering, but markets expect some hint that the announcement could come as early as the November meeting assuming a strong employment reading in early October. The Fed’s quarterly summary of economic projections will also be released Wednesday.
A quick summary of foreign exchange action on Monday shows that EUR-USD has recovered earlier losses, heading back up to 1.1730 after slipping to near the 1.1700 level earlier. The pair has been under pressure since Sept. 6 and could approach a one-month low of 1.664 if risk aversion continues to support the dollar.
GBP-USD dipped to near a one-month low of 1.3647, due mainly to the risk aversion trend that favours the dollar over the pound. Rising natural gas prices were also a negative for the pound. The Bank of England’s monetary policy committee also meets this week, but changes to the policy are unlikely until further labour improvements are seen.
USD-JPY fell from overnight highs, as the yen has so far received the better part of the risk aversion trade despite concerns in Asia regarding Evergrande. As long as equity markets remain low, the pair will have limited upside potential.
USD-CAD rallied to a one-month high of 1.2895 from 1.2766 on Friday, with the US dollar lifted by the safe-haven demand and lower oil prices pulling down the Canadian dollar.
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U.S Dollar Moves Higher Monday Amid Concerns About China
