Peter Nurse

Investing.com reports that the U.S. dollar fell Monday morning in European trading. This was due to risk-aversion boosting by hope that China will loosen its lockdowns and help boost global growth.

The, which monitors the greenback against six currency baskets, was 0.5% less at 102.660 (0755 GMT). This is a drop from the two-decade peak reached in May.

The safe haven dollar appears to have lost momentum with risk sentiment on the rise, boosted by the news that Shanghai, China’s commercial hub, is set to lift its city-wide lockdown and return to more normal life from June 1.

Additionally, Beijing authorized an unexpectedly large rate cut last week, which has been taken as a signal that the Chinese authorities are going to provide support to the world’s second largest economy.

“DXY [the dollar index] could correct a little lower to 102.30, but we see this as bull market consolidation, rather than top-building activity,” said analysts at ING, in a note. “Not until the Fed pours cold water on tightening expectations should the dollar build a top.”

It fell 0.5% at 6.6592. The pair continued to slip following the week of its strongest week since 2020.

Australian and New Zealand dollar, which are highly risk sensitive, rose to their highest level in several weeks. They went up by 1.1% to 0.7111 as well as up 1.2% at 0.6467. 

Australia elected a on Saturday, but this is not expected to impact the Reserve Bank of Australia’s thinking regarding monetary policy. On Wednesday, the is likely to increase its benchmark by 50 basis point.

Prior to the May key release, the index rose 0.5% and reached 1.0608. 

The important U.K. market for housing continued to show strength, rising 0.7% to 1.2573. Rightmove data shows that asking prices for U.K. properties rose to new records for the fourth month straight. The increase was 2.1%, which is the most since 2014. 

This week’s focus will shift to Wednesday’s publication of the Federal Reserve. Traders are seeking clues on whether the central bank of the United States can stop the most aggressive actions in over 40 decades, without sending the economy into recession.

Since March, the Fed has raised 75 basis points. Markets expect 50 basis point rate increases in June or July.