Yuan strengthens as Biden-Xi seek reset; dollar waits for data

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SYDNEY (Businesshala) – The yuan rose to a five-month high in Asia on Tuesday as traders welcomed talks between the US and Chinese presidents, while the dollar neared a 16-month peak against the euro ahead of US retail sales data Which could have affected the outlook for interest rates.

FILE PHOTO: A US dollar and the Chinese yuan are seen in this example taken on May 7, 2021. Businesshala/Dado Ruvik/Illustration

Calling US President Joe Biden an “old friend”, his Chinese counterpart Xi Jinping said his countries should increase communication and cooperation – remarks that hoped the markets were cordial, could lead to a reduction in tariffs.

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Support for riskier currencies eased as further readings from both sides showed a wide gap in the relationship between the world’s two largest economies, but the yuan was kept supported at 6.3728 per dollar.

It had climbed up to 6.3666 per dollar. [CNY/]

The euro, at $1.1377, lacks key support to around $1.12 and was raised on Monday amid the COVID-19 outbreak on the continent and the insistence of Europe’s central bank chief not to rush to hike rates.

The risk-sensitive Australian and New Zealand dollars posted modest gains but pulled back as traders waited for US retail sales data due by 1300 GMT. The yen was steady at $114.15 per dollar and the Australian was last flat at $0.7344.

“U.S. retail sales today are a big time to see if there is demand resilient amid inflation,” said Vishnu Varthan, head of economics at Mizuho Bank in Singapore. If so, it could mean more pressure on the Federal Reserve to hike rates soon.

Another factor in the small move in the Asia session was that Biden could soon announce his choice for Federal Reserve chair – perhaps either the reappointment of Jerome Powell or the promotion to Fed governor Lyle Brainard.

“If Powell is elected, we expect no impact on the dollar. But if Brainard is elected, we expect a short-term fall in US interest rates and the dollar as it is widely believed That the Brainard-led FOMC will be more sluggish than otherwise,” said Commonwealth Bank of Australia analyst Carol Kong.

Earlier in the Asia session, Reserve Bank of Australia chief Philip Lowe re-emphasized market pricing in the RBA rate hike in 2022, but it had little immediate impact on traders who were trading up to 100 basis points in early 2023. Expect it to be tough.

The New Zealand dollar was stable at $0.7035 and was in wait mode ahead of the Reserve Bank of New Zealand meeting next week, where markets rose 25 basis points and there is a 40% chance it will be 50 basis points higher.

Sterling was steady at $1.3419.

Euro crosses were also sluggish after European Central Bank chief Christine Lagarde insisted Monday that hikes could do more harm than good at this point – a stark contrast with hawkish signals being left by other central bankers.

The common currency fell to $1.1356 on Monday, pushing the US dollar index to a 2021 high of 95.595, as well as broadly affecting the euro.

Bank of England Governor Andrew Bailey told a parliamentary committee that the gulf sent the euro to its sharpest slide against the pound on Monday as he was “very uneasy” about inflation.

Canada’s central bank chief Tiff McCalem was even more outspoken and said “we are getting closer” to the move in an opinion piece, pushing the Canadian dollar to a four-and-a-half-year high against the euro.

Bitcoin is down 5% and testing support is at $60,600.

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Currency Bid Price 0633 GMT . Feather

Details RIC Last US Close PCT Change YTD PCT High Bid Low Bid

last change

Session

Euro Dollar

$1.1375 $1.1367 +0.07% -6.90% +1.1386 +1.1360

dollar / yen

114.1900 114.1850 +0.01% +10.56% +114.3050 +114.1350

euro/yen

129.88 129.74 +0.11% +2.33% +130.0700 +129.7000

dollar/swiss

0.9250 0.9246 +0.02% +4.53% +0.9257 +0.9238

sterling/dollar

1.3422 1.3415 +0.05% -1.76% +1.3437 +1.3412

Dollar/Canadian

1.2518 1.2511 +0.06% -1.70% +1.2522 +1.2493

Australian dollar

0.7338 0.7348 -0.13% -4.61% +0.7368 +0.7336

New Zealand

Dollar/dollar 0.7033 0.7045 -0.16% -2.06% +0.7063 +0.7033

all spots

Tokyo Spot

Europe Spot

instability

BOJ. from tokyo forex market information

Editing by Sri Navaratnam, Jacqueline Wong and Simon Cameron-Moore

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