Dollar Falls Broadly as Markets Favor Risk FX, Yuan
The dollar declined against all Group-of-10 peers as investors bought risk-on currencies sensitive to China’s outlook. The yen and Swiss franc rose as traders await more details on the temporary truce between the world’s two largest economies.
Aussie and kiwi climbed 0.6% to lead commodity FX higher, taking cues from the yuan, which hit a six-month high after the PBOC fixing. The yen advanced on demand from leveraged accounts booking short-term gains and as Treasury yields slipped after Monday’s spike, according to Asia-based FX traders. The pair was also sold after release of the Bank of Japan’s summary of opinions and Uchida comments
The Bloomberg Dollar Spot Index fell 0.2% since spiking 1% on Monday following a de-escalation of trade tensions between US and China
“Unwinding of positions probably played a big part in the JPY and CHF moves overnight, with gains in these havens today suggesting consolidation is the theme,” said Rodrigo Catril, a senior foreign-exchange strategist at National Australia Bank in Sydney “The positive backdrop is favorable for pro-risk currencies with AUD and NZD finally showing a positive correlation to risk appetite,” Catril added.
USD/JPY down 0.5% to 147.74 after advancing 2.1% on Monday.
“The resilience in the yen and Swiss franc suggests that investors are still hedging against deeper uncertainties,” said Charu Chanana, chief investment strategist at Saxo Markets. “Until we see signs that the real economy is absorbing these trade shifts without faltering, FX markets may remain skewed toward caution”.
Bank of Japan Deputy Governor Shinichi Uchida reiterates the central bank’s stance to raise interest rates once its economic outlook is realized.
USD/CHF slipped 0.3% to 0.8432.
AUD/USD gained as much as 0.7% to 0.6416, helped in part by dip buying exporters, according to a trader.
GBP/USD up 0.2% to 1.3201 before UK payrolls data.
Source: Bloomberg
