FX UPDATE
The Dollar edged down on Monday, under 7 Yuan, on improved sentiment toward riskier assets following indications of China relaxing certain Covid restrictions. Over the weekend, Shanghai and Urumqi announced some curbs would be eased following a series of protests against the country’s strict zero-Covid policy. “It may seem like they are baby steps but nonetheless quite a strong sign of China taking calibrated steps in the direction of reopening,” said Christopher Wong, OCBC currency strategist. In offshore trade, the greenback fell below 7.0 Yuan, whilst there was a 1.4% rise in the onshore Yuan to 6.9507 on Monday morning, the strongest seen since mid-September, Reuters reports. The Dollar index – measuring the currency against six major rivals, declined 0.268% to 104.19, the lowest since 28th June. Last week, the index edged down 1.4%, falling 5% for the entire month of November. This is the worst monthly performance since 2010 as expectations mount that the Fed will slow down the pace of rate hikes following four consecutive increases of 75 basis points. The U.S. central bank is forecast to hike rates by 50 basis point at this month’s meeting. According to the OCBC currency strategist: “They are still tightening, it's just that it is going to be in small steps.”
Elsewhere, the Japanese Yen fell 0.20% against the Dollar to 134.59, following last week’s 3.5% gain, far from October’s 151.94 low. The focus has been on the downsides of a policy of extended monetary easing ahead of the central bank leadership shift when the second term of governor, Haruhiko Kuroda comes to an end. The Bank of Japan should carry out a monetary policy framework review and amend the massive stimulus programme depending on the outcome, said board member Naoki Tamura. “You got a case of not just the Fed slowing its pace of policy tightening but you also have the case of potential BOJ unwinding, maybe very early stage, some of its very accommodative policy,” Wong added. The two forces coming from both sides can give the Dollar/Yen a bit more downside ... there is still room for Dollar/Yen to test lower.”
In addition, the Euro increased 0.32% to $1.0572, following a 1.3% rise last week. The single currency previously reached over a five-month high of $1.05835. The Pound increased to $1.23450 on Monday, the highest seen since 17th June, and at the time of writing stood at $1.2327, a 0.33% gain on the day. Furthermore, the Australian Dollar edged up 0.59% to $0.683, while the New Zealand Dollar was 0.31% up at $0.643.