FOREX-Dollar near 16-month high versus euro ahead of U.S. retail sales data

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*China’s offshore yuan hits 5-month high

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* Euro versus dollar at 16-month low

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* Graphic: World FX Rates

LONDON, Nov 16 (Businesshala) – The dollar fell below a 16-month high against the euro on Tuesday, while the yuan hit its strongest level in more than five months as markets welcomed talks between US and Chinese presidents. did.

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In talks, US President Joe Biden and Chinese leader Xi Jinping stressed their responsibility to the world to avoid conflict, giving Asian currencies an overnight lift. But support for riskier currencies waned somewhat as negotiations did not yield much success.

The dollar overnight fell to a five-month low of 6.3615 against China’s offshore yuan, and the pair was still down about 0.1% at 0850 GMT, at 6.3767.

But the Australian dollar – seen as a liquid proxy for risk appetite – lost overnight gains from early European trade, down 0.1% on the day at $0.73425.

The dollar index was a touch lower at 95.446, hitting its highest level in 16 months after US inflation data last week raised consumer prices at the highest rate since 1990, fueling speculation that The Federal Reserve may raise interest rates sooner than expected.

Investors are waiting for US retail sales data later in the session, which could also affect the outlook for interest rates.

There was little change in the euro after European Central Bank President Christine Lagarde extended recent losses on Monday.

Lagarde said a tightening of monetary policy now to rein in inflation could hamper the recovery of the euro area, comments that were seen as calls for tighter policy and a push back on market bets.

UniCredit strategists wrote, “Even though less-than-consensus economic data was released this afternoon in the US, including retail sales and industrial production, we suspect this is likely to change the scenario now that the rally in the euro- Selling USD is supported.” In the client note.

Analysts also said rising COVID-19 cases in Europe were hurting European currencies, including the euro.

On Monday, Austria imposed a lockdown on people who were not vaccinated, while Germany’s parliament is to vote on Thursday on tough measures to deal with the rising number of cases. France, the Netherlands, and many countries in Eastern Europe are also experiencing an increase in the number of infections.

“Fears that the situation could escalate and result in further tightening of sanctions in the coming months is hurting sentiment towards European currencies,” MUFG currency analyst Lee Hardman said in a client note.

The British pound rose 0.4% to $1.3467 against the dollar, data showed British employers hired more people after the government’s job-protecting furlough scheme ended in October.

The Swedish crown was up about 0.2% at 8.789 against the dollar. Swedish headline inflation hit its steepest pace since 2008 in October, Monday’s data showed.

“We believe that the Riksbank will tentatively call an increase in inflation at its meeting next week,” Commerzbank FX and EM analyst Yu-Na Park-Hager wrote in a client note.

Elsewhere, cryptocurrency bitcoin was down nearly 4.5% on the day at $60,750.

Reporting by Elizabeth Hawkroft; Editing by Giles Elgood


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