On Monday, the dollar slipped a little, staying close to two-year highs. Meanwhile, traders will look at key U.S. economic reports this week for more information on what it means for the Federal Reserve to raise interest rates.
According to a Reuters report, the Chinese yuan, on the other hand, was in the spotlight after weakening past the critical 7.3 per USD mark in the onshore market on Friday. It was the first time in 14 months that the PBOC had worked hard to keep its level flat throughout December.
The onshore yuan fell 0.05% by Monday, while the offshore yuan rose 0.15% to 7.3487 per dollar.
Ray Attrill, head of FX strategy at National Australia Bank (NAB), said, “The PBOC seems to have stopped defending the 7.30 level.” He added, “This raises questions about whether they are now letting the dollar-yuan pair move into a higher range, which could impact other Asian currencies, as well as the Australian and New Zealand dollars.”
The PBOC set the midpoint rate, at which it trades with banks, ahead of the market’s opening on Monday at 7.1876 yuan per USD, within the 2% range.
The New Zealand dollar rose 0.22 percent to $0.56245, and the Australian dollar’s last trading was at $0.6227.
Australian and New Zealand dollars, sometimes used as proxies for the yuan, were barely affected by Friday’s dip in the Chinese currency. They both added around 0.2% in the Asian trading session.
Investors looking for insight into the state of the American economy were interested in Friday’s U.S. jobs report. Several Federal Reserve officials are scheduled to speak this week and could echo recent remarks on the battle to tame inflation.
The U.S. dollar remains strong amid expectations of fewer Fed rate cuts. After last week’s surge, the euro hit its weakest in over two years. The dollar index was a little down at 108.89, while the euro stood still at $1.0310.
The British pound ticked up 0.13% to $1.2440. The Japanese yen, meanwhile, was down 0.24 percent to 157.66 per dollar.
The dollar also drew support on haven grounds as markets remained unclear on what President-elect Donald Trump’s economic agenda will look like regarding import tariffs, tax cuts, or immigration policies. Traders are cautious, with his inauguration on Jan. 20.
Even with Trump now the president-elect, there’s still so much unknown about how fast Trump’s policies are going to take shape and whether they’ll be different from what he said during the campaign, explained NAB’s Ray Attrill. He said that, currently, one just can’t bet against the dollar staying strong.
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