Dollar starts week strong, poor Chinese data hurts Aussie

U.S. dollar banknotes are displayed in this illustration taken February 14, 2022. REUTERS/Dado Ruvic

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HONG KONG, May 16 (Reuters) – The dollar started the week just off a 20-year high against its peers on Monday, as investors sought safety amid global growth fears that surfaced. evidenced by weak Chinese economic data on Monday, sending the Aussie dollar lower.

The dollar index was at 104.57, after briefly crossing the 105 level on Friday, its highest since December 2002, after six successive weeks of gains.

“Ongoing geopolitical tensions, ongoing global supply disruptions, a slowing Chinese economy and a hawkish Fed suggest the USD should be stronger for longer,” HSBC Global FX Research said in an updating note. its foreign exchange forecasts.

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They expect the euro to fall to parity against the dollar in the coming year. “Much lower growth and much higher inflation leaves the ECB facing one of the toughest policy challenges in the G10 (central banks),” they said.

The single currency was at $1.0395 on Monday morning, slightly lower, and just above the $1.0354 level hit on Thursday, its lowest since early 2017.

Movements were sharper for the Australian dollar, which fell 0.68%, hurt by weaker-than-expected Chinese data for April, when COVID-19 lockdowns weighed heavily on consumption, industrial production and employment, adding to fears of a sharp slowdown in the second quarter. Read more

“I think people want to see more efforts to stabilize the Chinese economy, so that’s something to watch,” said Sim Moh Siong, currency strategist at Bank of Singapore.

He said investors were also awaiting further guidance from the Federal Reserve on the path of interest rates and the Russian-Ukrainian war given the risks it poses to European growth.

Markets are pricing in 50 basis point hikes at the next two Fed meetings, according to CME’s Fedwatch tool, but with the possibility of bigger increases.

“There isn’t much more advice the Fed can give in light of the uncertainty on the inflation front, but they seem ready to issue soothing words to rule out a 75 bp rate hike. base,” Sim said.

The pound, which suffered with the euro, was at $1.2244 on Monday, having fallen to $1.2156 last week, hurt by weaker than expected first quarter GDP figures.

In the coming week, Britain will have data on the labor market, inflation and consumer confidence.

The Japanese yen was a bit firmer at 129 yen to the dollar. Last week it recovered from a low of 131.35 and had its first week of gains since early March.

With yields locked in Japan, the yen is vulnerable to rising US yields, but fears over global growth caused US Treasury yields to halt their advance.

Crypto markets, which trade around the clock, had a quiet weekend after last week’s turbulence caused by TerraUSD, a so-called stablecoin, which broke its peg to the dollar.

Bitcoin was trading around $30,300 down 3% after falling to $25,400 on Thursday, its lowest since December 2020.

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Editing by Sam Holmes and Jacqueline Wong

Our standards: The Thomson Reuters Trust Principles.

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