TOKYO, Sept.27 (Reuters) – The risk-sensitive Australian dollar rallied and the safe-haven yen plunged to its lowest level in nearly three months on Monday amid fears of widespread contagion market share by the China Evergrande group (3333.HK) faded.
Rising commodity prices also helped the Aussie and the Norwegian krone, while the yen was under pressure as higher US yields attracted money from Japanese investors.
The euro traded little at $ 1.17205, largely ignoring the development of the weekend’s German election as the Social Democrats narrowly beat the conservative CDU / CSU bloc. Read more
The Dollar Index, which measures the US currency against six major rivals, hovered in the middle of its range last week, trading slightly lower at 93.240.
US yields hit their highest level since early July in anticipation of a tightening of US monetary policy after the Federal Reserve announced last week that it could start gradually reducing stimulus measures as early as November and that Reported interest rate hikes could follow sooner than expected. Read more
“The USD will likely remain caught in the cross-currents of a more hawkish FOMC and concerns about a possible Evergrande default are fading,” Commonwealth Bank of Australia analysts wrote in a client note.
“Nonetheless, the risks are skewed towards a stronger dollar,” they said.
Fears that China’s second-largest developer Evergrande might default on its $ 305 billion debt have eclipsed trade in recent weeks, but some of those contagion fears are fading.
The People’s Bank of China injected net 100 billion yuan ($ 15.5 billion) into the financial system on Monday, adding to last week’s net 320 billion yuan, the highest number since January.
Several local governments in China have set up special custodian accounts for Evergrande real estate projects to protect funds for housing projects from embezzlement, Caixin news outlet reported over the weekend. Read more
The yen weakened to 110.81 per dollar, hitting a low on July 7, before trading slightly stronger since late last week at 110.645.
This follows movements in the benchmark 10-year US Treasury yield, which hit 1.4660% for a second day on Monday, the highest since July 2, before falling back to 1.4527%.
“The correlation between US bond yields and USDJPY has strengthened,” Chris Weston, head of research at broker Pepperstone in Melbourne, wrote in a client note.
“USDJPY looks a bit stretched so I would be careful to continue here but look for a new test of 110.50 as a potential support area in what is a gradually uptrend.”
The Aussie climbed 0.37% to $ 0.72835, from $ 0.72205 a week ago, its lowest since August 24.
The Norwegian krone gained around 0.4% and touched 8.5493 to the dollar for the first time since July 6.
The Canadian dollar rose about 0.3% to reach C $ 1.2622 per greenback.
The gains come as Brent crude rose for a fifth day, approaching $ 80 a barrel, while iron ore, copper and other industrial metals rose.
Stakeholders at central banks will be the focus this week, with Fed Chairman Jerome Powell joining Treasury Secretary Janet Yellen in addressing Congress on Tuesday.
The European Central Bank holds an annual forum on Tuesday and Wednesday, with not only ECB President Christine Lagarde speaking on day one, but also joining a roundtable on day two with Powell, the Bank’s governor. of Japan Haruhiko Kuroda and Bank of England Governor Andrew Bailey.
($ 1 = 6.4662 Chinese renminbi yuan)
Reporting by Kevin Buckland; Editing by Ana Nicolaci da Costa and Lincoln Feast.
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