The dollar falls as risk appetite returns
- Rise in commodity currencies
- Japanese yen gives some gains from Thursday’s peak
- Busy Week Ahead, Headlines US Inflation Data
NEW YORK, July 9 (Reuters) – The dollar edged down on Friday, as did the Japanese yen as riskier currencies favored, the rally in US Treasuries falters and global equity markets stabilize.
Some recent weak US data, along with an increase in COVID-19 cases in many parts of the world, has fueled concerns that the global economic recovery is faltering, leading to an eight-day streak of decline for the 10 years. The Treasury yield which ended on Friday.
“This week was all about the bond market and the collapse of Treasury yields,” said Edward Moya, senior market analyst for the Americas at OANDA. “Part of that movement was probably overdone.”
The rise in yields supported riskier assets and currencies, with global equity markets rising and the commodity-linked Australian and New Zealand dollars bidding. Read more
The Aussie rose 0.79% to $ 0.74905, after hitting a new year low of $ 0.7410, and the kiwi added 0.81% to $ 0.7002, after hitting plunged more than 1% during the previous session.
The euro extended its gains in addition to a 0.45% jump on Thursday, rising 0.27% to $ 1.1876.
The dollar index slipped 0.252% to 92.131. Chart: Global exchange rates https://tmsnrt.rs/2RBWI5E
The greenback’s decline was likely due in part to profit taking ahead of key US inflation data for June due next week, said Joe Manimbo, senior market analyst at Western Union Business Solutions.
“Dollar bulls are just taking a few chips off the table,” he said.
The yen, seen as a safe haven currency, fell as risk appetite began to recover.
“Yesterday’s decline in the dollar-yen is reversing with equity risk appetite, suggesting that there are no broader ripple effects in markets at the moment – the same movement is seen in the US 10-year yield rebounding above 1.3%, “said Steen Jakobsen, chief investment officer at Saxo Bank.
The yen eased 0.39% to 110.185, returning some of its gains against the greenback on Thursday, when it recorded its biggest daily rise since November.
The Canadian dollar strengthened 0.61% against the US dollar to $ 1.2453 as oil prices rose and data showed Canada created more jobs than expected in June so that public health restrictions have been relaxed in several parts of the country. Read more
Elsewhere, the People’s Bank of China has said it will reduce the reserve requirement ratio (RRR) – the percentage of deposits lenders must keep – for all banks by 50 basis points, effective July 15, which will help stimulate a return to riskier assets. .
“We’re probably going to see some new momentum with this RRR reduction and I think we’ll probably see some follow-up once Asia opens up on Sunday,” OANDA’s Moya said.
Looking ahead, US retail sales figures for June are also expected next week, along with US bank profits.
In addition to the busy week ahead, US Federal Reserve Chairman Jerome Powell is expected to appear before Congress, and rate decisions from the central banks of Japan, Canada and New Zealand are underway.
Reporting by John McCrank; Editing by Andrew Heavens and Alex Richardson
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