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Dollar holds gains, yuan under pressure as Evergrande risks grow By Reuters


© Reuters. FILE PHOTO – This illustration, taken on May 7, 2021, shows the U.S. dollar and Chinese Yuan. REUTERS/Dado Ruvic/Illustration

By Kevin Buckland

TOKYO (Reuters) – The wallowed near an almost one-month low on Tuesday while the safe-haven dollar and yen stood tall as investors sought shelter from a potential China Evergrande default.

After the assistant governor of New Zealand’s central bank sounded cold about bets on a 50-basis point rate increase next month, the New Zealand dollar fell as well.

On Monday, the dollar fell to 6.4805 after it dropped as much as 6.4879 for the first time since Aug. 23, when it was weaker than before. All markets on the mainland are closed until Wednesday due to holidays.

“It feels like the market was waiting on something from the Chinese authorities over the weekend to calm the markets and ringfence the contagion worries from a looming Evergrande default, and that didn’t come,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.

The traders sense that a credit crisis is imminent.

Analysts at Wells Fargo (NYSE:) expect the dollar to reach 6.60 per yuan in the next month for the first time since November.

On Wednesday’s two-day policy meeting, the Federal Reserve is expected to signal that stimulus tapering will begin. The U.S. currency has already been moving higher.

After gaining $1.1700 overnight, the greenback was mostly unchanged at $1.17245 per Euro. This is also a first since August 23rd.

Although the yen lost 0.2% to USD 128.50, it is still near its Monday high of 128.155, which was not reached since August 20th, when it hit a new all-time high.

Although the dollar fell 0.8% to 109.58 Japanese yen overnight, it still remains close to its high of 128.155 from Monday. However, the trade range for the last two-1/2 months is near its middle.

It is expected that the Bank of Japan will change its policy, but no changes to its vast stimulus programme.

The currency’s value against six of its major peer currencies was little affected at 93.2241, after it rose overnight to 93.455, for the first time since August 23.

Evergrande is seeking to raise funds for a variety of investors, lenders and suppliers, which has caused market sentiment to be shaken. The company’s debts total $305 billion and a deadline of $83.5 million for a payment of interest on its bond is Thursday.

Chinese regulators warned Monday that the insolvency of the company could increase risks to the financial system in China if it is not stabilized.

Moves in Hong Kong’s could dictate the direction for the Australian dollar and other commodity-linked currencies in the near term, Pepperstone’s Weston said.

The edged 0.07% higher to $0.7258 after dipping to $0.72205 in the previous session for the first time since Aug. 24.

New Zealand’s dropped 0.3% to $0.7011, approaching Monday’s low of $0.7006, the weakest level this month. After the speech of Assistant Governor Christian Hawkesby, it seems unlikely that there will be a 50 basis-point increase to the RBNZ policy rate. The text suggests that the central bank might move in 25 basis points increments.

The Sterling fell to $1.3662, after falling nearly one month ago at $1.3640 overnight. Thursday’s policy announcement by the Bank of England.

The regained some footing having hit a one-month low of C$1.2896 against its U.S. counterpart overnight heading into national election that could heighten political uncertainty in Canada. In Asia, the dollar fell 0.15% to C$1.2805

The turn in risk sentiment also affected cryptocurrencies. Bitcoin fell more than 3 percent to $41,700, after touching $40,192.90 on Aug. 6.

After dropping to $2.803.20 earlier in August, smaller competitor ether fell around 3%, to $2.891.77.


Currency bid prices at 0106 GMT

$1.1724 $1.1728 +1.1730 +1.1724

109.5900 109.4000 +109.5900 +0.0000

128.48 128.26 +128.5000 +128.2400

0.9279 0.9278 +0.9281 +0.9277

1.3654 1.3657 +1.3664 +1.3650

1.2801 1.2820 +1.2822 +1.2800

0.7257 0.7253 +0.7263 +0.7249

0.7008 0.7031 +0.7027 +0.7000

All spots

Tokyo spots

Europe spots


Tokyo Forex market info from BOJ