Dollar Retreats from 10-Week Highs as Risk Appetite Rebounds
London – The dollar has seen a slight easing from its recent 10-week peaks on Tuesday as global risk appetite staged a rebound. A jump in US government bond yields and concerns over the weakening Chinese economy have hurt global risk sentiment in recent weeks, boosting the dollar. However, the dollar index, which measures the currency against six developed-market counterparts, fell 0.25 percent to 103.06, below Friday’s 10-week high of 103.68.
Although the dollar has gained just over 1 percent so far in August, it slipped 0.3 percent to 145.79 yen, pulling away from last month’s nine-month peaks. Bank of Japan Governor Kazuo Ueda met with the prime minister but said exchange-rate volatility was not discussed. The dollar’s overall movement is expected to be limited ahead of Federal Reserve Chair Jerome Powell’s speech at the Fed’s central bank symposium in Wyoming.
The greenback also came under pressure against European currencies as London trade got underway, with the euro firming a third of a percent to $1.0928 and sterling also up roughly 0.3 percent to $1.2798.
China’s yuan found some respite and briefly rose to a one-week high against the dollar as Beijing’s efforts to slow its decline gained traction. However, pressure from rapidly rising US yields and concerns about the Chinese economy continue to weigh on the currency. The Chinese central bank set the yuan midpoint at 7.1992 per dollar on Tuesday, attempting to keep a floor under the currency following its slide to a 9-1/2-month low of 7.349 in offshore trading last week.
The Australian dollar also recovered, rising 0.4 percent to $0.6441 as global risk appetite improved. It had dropped to a 9-1/2-month low of $0.6365 last week.
Analysts suggest that a big Chinese stimulus package focused on commodity-intensive infrastructure spending may be needed to reverse the downtrend in the Australian dollar.
Overall, the dollar’s outlook will likely depend on what Powell says about whether interest rates will remain higher for longer.
