By Tom Westbrook
SINGAPORE (Reuters) – The dollar began the week firmly on Monday with investors in a cautious mood ahead of several central bank meetings, headlined by the Federal Reserve, while looming catastrophe at indebted developer China Evergrande added to markets’ fragility.
The euro suffered losses due to holiday in Japan and China. It fell slightly to $1.1721, a low for the month.
New lows were experienced by sterling and New Zealand Dollars as well. The , at $0.7024, and sterling, at $1.3722, made three week lows as did the which fell 0.1% to $0.7253. [AUD/]
Imre Speizer of Westpac, an analyst, said, “The U.S. dollars is experiencing a bit more of a recovery.” He added that support came from both the Fed’s expectation of asset purchases being reduced and the need to be cautious as the equity markets get shaky.
Everyone is watching the Fed and waiting for a tapering signal.
The rose very slightly to a month-high 93.263. The dollar was 110.01 yen.
Central banks will be present in Japan, Switzerland and Norway as well as in the UK, Sweden and Norway.
On Wednesday, the Fed will conclude a two-day meeting. Markets agree that they will continue with their broad plans for tapering in this year’s fiscal year. However, they will not provide details nor a timetable and will keep them from doing so for at least one month.
However, the rising yields on the U.S., at 10 year, point to a risk of a surprise from the Fed or shifts in projections that show increases as early 2022. Both of these could be supportive of the dollar.
Marshall Gittler from brokerage BDSwiss stated that only two Fed members would be required to shift their views on the “dot plot,” which shows median projections for hikes in 2019.
He said that it was possible for them to go from forecasting zero rate increases next year to at most one.
“Similarly, they are now forecasting two hikes in 2023 – that could easily go to three as well.”
While the Bank of England will likely keep policy unchanged among the other central banks, traders still see the potential to gain in the currency should the Bank adopt a hawkish tone. Additionally, more members may call for asset buy tapering.
On Wednesday, the Bank of Japan is not expected to make any policy changes. However, the Norges Bank in Norway will be the first G10 central banks to raise rates.
On Friday, the Norwegian crown fell with rising oil prices. The last week’s low was 8.7154 dollars.
Oil-sensitive Canadian dollars were also in decline ahead of Monday’s election. Polling indicates that incumbent Prime Minister Justin Trudeau has a slight advantage, but it is possible that he will remain leader of a minority government.
China had its onshore currency and stock market closed Monday. But the Yuan suffered offshore from the pain caused by Evergrande’s ongoing debt crisis.
The yuan lost 0.1%, falling to 6.4770 per dollar after its 200-day moving mean. Evergrande is due to pay $83.5million in interest.
Currency bid prices at 0116 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
$1.1721 $1.1726 -0.04% -4.07% +1.1734 +1.1721
109.9850 109.9500 +0.07% +6.53% +110.0300 +110.0300
128.91 128.94 -0.02% +1.57% +129.0300 +128.9100
0.9323 0.9325 -0.03% +5.37% +0.9325 +0.9321
1.3719 1.3727 -0.02% +0.45% +1.3740 +1.3722
1.2774 1.2768 +0.05% +0.32% +1.2778 +1.2762
0.7253 0.7263 -0.14% -5.71% +0.7268 +0.7253
Dollar/Dollar 0.7028 0.7035 -0.07% -2.10% +0.7042 +0.7024
Tokyo Forex market info from BOJ