Dollar Remains Strong Overall, But Drops to New Lows Against Yuan Ahead of FOMC
Asian stocks rallied and crude prices eased, but the decrease in safe haven flows has failed to weaken the greenback as the market is anticipating dollar-positive signals from the FOMC and other major US data points this week.
The Shanghai CSI 300 index traded 2.54% higher on Monday at 6:00GMT, while the MSCI Asia apex 50 was up 0.62%. The Nikkei 225 traded 0.47% higher.
Brent crude for spot delivery has eased to $107.76/bbl from Friday's close of $108.22. There were reports of continuing fighting on the Russia-Ukraine border, but overall, the geopolitics-related news flow was not up to prevent a risk rally.
The US dollar index, a gauge that measures the strength of the greenback against currencies of the six largest trading partners of the US, held near the near six-month high of 81.08 touched on Friday. It had dropped 0.75% in June but has rallied 1.6% so far this month.
The EUR/USD traded near Friday's eight-month low of 1.3438 and the GBP/USD only marginally off the one-month low of 1.6961.
Fed meeting
The US Fed meets on 29-30 July to debate monetary policy, and before the rate announcement on Wednesday, ADP employment numbers and Q2 GDP data will be released. The very important US non-farm payroll data is due on Friday.
The dollar strengthened against its New Zealand and Australian counterparts but weakened against the Chinese yuan on Monday in Asian session.
The NZD/USD has fallen to a new six-week low of 0.8533 on Monday, marking its third straight day of losses. The pair lost ground on Thursday when the Reserve Bank of New Zealand said the Kiwi dollar's strength cannot be justified and has dropped 1.95% since then.
The Aussie dollar is also down for the third consecutive session and has fallen to a five-day low of 0.9383 on Monday.
The Chinese yuan has been on an appreciating track since 22 July, and Monday's drop in the USD/CNY to a new four-month low of 6.1865 made the fifth straight day of gains for the yuan.
Nothing major is scheduled on the data front in Australia and New Zealand in the week to 1 August, but minor ones like June housing market data, AiG performance of manufacturing index for June and Q2 import and export price indexes may prove crucial for the AUD.
Building permits and M3 money supply data, both for June, are the only data scheduled in New Zealand.
Until Friday's NBS manufacturing PMI and HSBC Business manufacturing PMI, there is nothing on the China data calendar this week. The NBS PMI has been steadily increasing since February, and has risen to a six-month high of 51.0 in May, according to last month's data.
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