Market Analytics and Technical Considerations
Key Points
The dollar declined on Monday as traders poured into riskier investments following the easing of certain COVID-related curbs in several Chinese cities, fanning prospects of a potential reopening of the second-largest economy in the world.
The offshore yuan increased by around 1.4% to as high as 6.9507 on Monday morning, its best level since September 13. The dollar dropped under 7.0 yuan in offshore trade.
The dollar index, which compares the value of the dollar to six important currencies, including the yen and the euro, fell by 0.268% to 104.19, its lowest point since June 28.
The index saw its worst month since 2010 last week, dropping 1.4% and 5% respectively. Expectations that the Federal Reserve will slow the pace of interest rate hikes following four straight 75 basis point increases are largely to blame for the recent decline in the value of the dollar.
The U.S. consumer price inflation report, which is expected out on December 13—the day before the Fed’s specific policy event ends be the subject of investors’ attention.
At the meeting, the U.S. central bank is anticipated to raise interest rates by an extra fifty basis point. Fed funds futures traders are now projecting that the benchmark interest rate will reach a top of 4.92% early May.
The Japanese yen, which had gained 3.5% last week while remaining still much above its October low of 151.94, declined 0.20% against the US dollar to 134.59 per dollar.
The yen is rising just as attention is turning to the negative effects of extended monetary stimulus and just before the governor of the Bank of Japan, the dovish Haruhiko Kuroda, steps down from his post at the conclusion of his second term.
After rising 1.3% previous week, the euro increased by 0.32% to $1.0572. It had previously reached $1.05835, a high of even more than 5 months.
When last traded, sterling stood at $1.2327, up 0.33% on the day, and had risen to $1.23450, its highest level since June 17.
The AUD increased by 0.31% to $0.643, while the Australian dollar increased by 0.59% to $0.683.
