Dollar snaps 2-day shedding streak, volatility rises as threat aversion grows

  • Graphic: World FX charges

Oct 4 (Reuters) – The greenback edged increased on Monday after two consecutive classes of losses as hedge funds ramped up their holdings as widening considerations concerning the Chinese property sector and resilient U.S. Treasury yields boosted the enchantment of the dollar.

After spending the second quarter of 2021 on the again foot the greenback has acquired a contemporary increase in latest weeks, climbing to its highest ranges in a yr towards its rivals final week as high funding banks have revised up their forecasts.

Citigroup strategists anticipate extra upside within the greenback resulting from challenges within the Chinese actual property sector, increased U.S. yields not pushed by a worldwide financial restoration and the detrimental impression for vitality importers.

Shares in embattled developer China Evergrande (3333.HK) had been halted in Hong Kong, rekindling market nerves about the potential for contagion. learn extra

The greenback’s positive aspects had been extra pronounced towards a few of its high rivals with the dollar scaling a 14-month excessive on the euro and a 19-month peak versus the yen final week as markets reckoned U.S. rates of interest might rise forward of world friends.

In early London buying and selling on Monday, the euro dipped again under $1.16 and at $1.1598 just isn’t removed from final week’s trough at $1.1563. Versus a basket of its rivals, the greenback edged 0.1% increased at 94.04, breaking a two-day shedding streak. The offshore yuan weakened about 0.3%.

Latest weekly positioning knowledge confirmed hedge funds have elevated their greenback holdings towards its rivals to its highest ranges since November 2019.

The greenback’s positive aspects has additionally infused life within the moribund foreign money volatility markets with a gauge measuring day by day swings rising to its highest ranges in 2-1/2 months at 6.2%.

With Chinese markets shut for a vacation, merchants consideration will likely be firmly targeted on month-to-month U.S. jobs knowledge on Friday that analysts imagine will pave the best way for U.S. policymakers to strike a extra hawkish tone. Yields on benchmark 10-year U.S. Treasury debt had been holding close to their highest ranges in additional than three months at 1.47%.

Friday’s U.S. labour knowledge is predicted to point out continued enchancment within the job market, with a forecast for 460,000 jobs to have been added in September – sufficient to maintain the Federal Reserve on target to start tapering earlier than yr’s finish.

“The market senses that if U.S. employment data stay robust in coming months, Fed rate hikes may not be too far behind an end to tapering in 2022,” Credit Suisse strategists mentioned in a quarterly outlook notice.

Reporting by Saikat Chatterjee; further reporting by Tom Westbrook in SINGAPORE; enhancing by Alex Richardson