DG: Dollar continues to strengthen, as Chinese data disappoints
The US dollar continued to strengthen against a basket of global currencies, including Asia Pacific and commodities linked ones on Monday, as a fresh round of economic data from China disappointed the market.
The country’s imports fell 8.1% year-on-year in July as expected, but exports fell 8.3% pointing to weakness in industrial production. Nonetheless, expectation of an economic stimulus by Beijing boosted the equity market.
Kit Juckes, head of forex at Societe Generale, noted: “I‘ll leave excitement about the policy response to others; I just expect the continued slowdown in Chinese growth to anchor commodity prices and resource-exporters' currencies.”
At 1457 BST, the dollar was up 0.34% against the yen, fetching JPY124.66. Concurrently, it was broadly flat against the Hong Kong Dollar fetching $7.7525 and up 0.13% against the Singapore Dollar changing hands at $1.3868.
The Australian dollar was also lower with AUD$1 fetching $0.7362, shedding 0.75% extending losses in Asia well into the European session, with the New Zealand dollar following suit and trading down 0.76% fetching $0.6572.
The bullishness is likely to continue, Juckes added. “Those who interpret the recent US Federal Reserve communication as indicating a desire to raise rates soon unless there are signs of economic weakness will expect a hike this year, probably in September.”
“But anyone who thinks that a lack of inflationary pressure and a sluggish pace of economic growth will result in the Fed keeping rates on hold for longer, will have been equally reassured in their view.”
Elsewhere, the euro remained predictably lacklustre down 0.21% fetching $1.0944 and heading lower as talks over Greece’s €86bn bailout. Finally, the pound sterling was up 0.07% against the dollar fetching $1.5502, and up 0.19% against the euro fetching €1.4163, with the Bank of England indicating that any interest rate rise would be “data dependent” with most economists leaving out the possibility of a November hike.
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