U.S. dollar climbs to two-year peak as risk appetite tumbles; yuan drops

By Saikat Chatterjee and Gertrude Chavez-Dreyfuss

LONDON/NEW YORK (Reuters) – The U.S. greenback struck a two-year excessive on Monday as a wave of danger aversion hit world markets, whereas the Chinese language yuan was set for its largest three-day shedding streak in practically 4 years on rising worries of an financial slowdown in China.

With warfare in Ukraine coming into a 3rd month and rising considerations of a China-wide COVID-19 outbreak sparking a rout in Chinese language shares, traders dumped foreign money market darlings just like the Australian greenback and the offshore Chinese language yuan.

Towards a basket of its rivals, the greenback gained 0.6% to 101.75, a stage it final examined in March 2020.

“This greenback dominance can solely be defined by the fears of COVID persevering with to affect China’s lack of exercise,” mentioned Juan Perez, director of buying and selling at Monex USA in Washington.

“Chinese language information has been OK, supposedly, per financial figures, however there’s rising concern that the No-COVID or zero-COVID measures are creating the necessity to revise outlooks additional downward. China’s shutdowns are killing world optimism,” he added.

China’s yuan fell to a one-year low in opposition to the greenback and was final down 0.9% at 6.4575 yuan per U.S. greenback.

The Aussie, which was one of many largest gainers in currencies within the first quarter of 2022 due to surging commodity costs, fell extensively. It dropped 1.5% in opposition to the U.S. greenback to US$0.7138 and fell 2.1% versus the Japanese yen.

The Norwegian crown additionally fell practically 2% versus the U.S. greenback, which final traded up at 9.1235.

Broader foreign money market volatility gauges ticked greater, with an index rising to its highest ranges in additional than a month.

BofA Securities strategists mentioned that regardless of the pickup in foreign money market volatility, traders had been lengthy the Canadian greenback, Aussie, and euro.

The euro’s tiny good points after French President Emmanuel Macron’s snug election victory over far-right rival Marine Le Pen shortly dissipated, with the one foreign money down 0.9% at $1.0716, in opposition to a resurgent greenback.

Newest positioning information for final week confirmed hedge funds trimmed their lengthy euro bets.

Graphic: FX positions – https://fingfx.thomsonreuters.com/gfx/mkt/mopanolqbva/FXpercent20positions.JPG

Hawkish feedback by varied policymakers final week additionally raised the dangers of aggressive coverage tightening by world central banks. Cash markets anticipate the U.S. Federal Reserve to boost rates of interest by a half level on the subsequent two conferences and the European Central Financial institution to boost rates of interest by 25 foundation factors in July.

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Foreign money bid costs at 10:18AM (1418 GMT)

Description RIC Final U.S. Shut Pct Change YTD Pct Excessive Bid Low Bid

Earlier Change

Session

Greenback index 101.6600 101.0800 +0.59% 6.269% +101.7500 +101.0500

Euro/Greenback $1.0718 $1.0810 -0.84% -5.72% +$1.0852 +$1.0707

Greenback/Yen 127.7000 128.5000 -0.62% +10.93% +128.8550 +127.6100

Euro/Yen 136.86 138.78 -1.38% +5.03% +139.1900 +136.8600

Greenback/Swiss 0.9562 0.9565 -0.03% +4.83% +0.9597 +0.9548

Sterling/Greenback $1.2723 $1.2840 -0.91% -5.93% +$1.2880 +$1.2706

Greenback/Canadian 1.2763 1.2711 +0.42% +0.95% +1.2769 +1.2707

Aussie/Greenback $0.7142 $0.7244 -1.40% -1.74% +$0.7268 +$0.7135

Euro/Swiss 1.0247 1.0333 -0.83% -1.18% +1.0347 +1.0245

Euro/Sterling 0.8423 0.8410 +0.15% +0.27% +0.8441 +0.8398

NZ $0.6595 $0.6635 -0.59% -3.64% +$0.6635 +$0.6584

Greenback/Greenback

Greenback/Norway 9.1360 8.9595 +1.89% +3.63% +9.1360 +8.9450

Euro/Norway 9.7933 9.6683 +1.29% -2.19% +9.7966 +9.6594

Greenback/Sweden 9.6901 9.5245 +0.90% +7.45% +9.6923 +9.5142

Euro/Sweden 10.3855 10.2933 +0.90% +1.48% +10.3890 +10.2954

(Reporting by Saikat Chatterjee in London and Gertrude Chavez-Dreyfuss in New York; Modifying by Catherine Evans, Mark Potter and Jonathan Oatis)