Dollar Up, but Falls From 20-Year High While Yuan Pauses Tumble

  • Forex News
Dollar Up, but Falls From 20-Year High While Yuan Pauses Tumble
Credit: © Reuters.

By Gina Lee – The dollar was up on Tuesday morning in Asia as it continues its fight for a footing. The Chinese yuan found a floor from its recent drop, however, with investors reducing bets on rising U.S. interest rates leading to further gains for the U.S. currency.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.02% to 104.04 by 11:29 PM ET (3:29 AM GMT). The index is around 0.8% below Friday's 20-year peak of 105.100.

The USD/JPY pair edged up 0.13% to 129.32.

The AUD/USD pair was up 0.39% to 0.6997 and the NZD/USD pair was up 0.26% to 0.6323.

The USD/CNY pair was down 0.23% to 6.7709 while the GBP/USD pair edged up 0.13% to 1.2334.

The dollar edged from a two-decade high in the week so far and kept losses small in early Asia trade. U.S. bond yields, on the other hand, have pulled back slightly as traders calculate that aggressive near-term interest rate hikes from the U.S. Federal Reserve will drag on long-term U.S. growth.

Across the Atlantic, the euro rose about 0.1% on the dollar to $1.0446, and the pound jumped around 1.5% from a two-year hold. The yen is holding above a two-decade low, while the riskier Australian and New Zealand dollars inched up around 0.1% and are off multi-year lows.

The Chinese yuan was steady at 6.7953 per dollar in offshore trade and looked like it was finding a base after falling more than 6% in a month. Shanghai reportedly hitting a milestone of three days of zero community transmission and the city could start easing out of its grueling lockdown. This could help offset Monday’s disappointing economic data.

Signs of more policy support are also emerging, with China cutting mortgage rates for first-home buyers over the weekend. Authorities also asked some financially healthy property developers to sell bonds, sources told Reuters on Monday.

Dollar/CNH has been a big driver of G10 currencies," Pepperstone head of research Chris Weston told Reuters, in reference to the offshore yuan . A pause in its slide, as well as calmer market volatility, generally has paused dollar gains for now, he added.

"A lot has been priced in and we're not getting any new news from Fed officials," he said. "I think people are just taking some of that money off the table at the moment."

Global interest rate expectations are also becoming more hawkish, with the gap between 10-year German and U.S. real yields narrowing by more than 30 basis points in May 2022 to date.

and central banks in the U.K. and Australia have also hiked interest rates.

The Reserve Bank of Australia also released the minutes from its latest policy meeting earlier in the day, with G-7 finance ministers and central bankers due to meet a day later.

Investors now await speeches from Fed Chairman Jerome Powell and other Fed policymakers later in the day, with Philadelphia Fed President Patrick Harker speaking a day later.

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