Dollar steadies as China tightens COVID curbs By Reuters


© Reuters. FILE PHOTO: U.S. dollar bills are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Rae Wee and Alun John

SINGAPORE/LONDON (Reuters) – The dollar steadied on Tuesday after rallying the day before as investors flocked to the safe-haven currency on worries about China’s COVID outbreaks, while bitcoin slumped on fears of fresh contagion from the cryptocurrency exchange’s collapse. FTX.

The euro rose 0.14% to $1.0258 after a 0.8% loss on Monday, sterling rose 0.19% to $1.1838, partially reversing its 0.6% fall, and the dollar was at 141.86 yen down 0.18% after a 1.2% gain.

“What happens in China will be oriented,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia (OTC:).

“There appear to be some … increased restrictions on the movement of people, and I think there will be inevitable economic impacts.”

Beijing warned on Monday that it was facing its severest test of the COVID-19 pandemic, with a surge in COVID cases triggering new restrictive measures. Deaths from the virus were also recorded in the capital for the first time since May.

Restrictions in Beijing and elsewhere tightened on Tuesday, although currencies appeared to think the previous day’s moves were enough.

MUFG analysts noted that more cautious remarks from Fed officials were also a factor in the dollar losing some momentum on Tuesday.

Cleveland Fed President Loretta Mester said the central bank may come down to smaller interest rate hikes next month, and San Francisco Fed President Mary Daly said the real-world impact of interest rate hikes is likely to be greater. than its short-term rate target implies.

The main factor driving dollar moves in recent months has been market expectations of how aggressively the Federal Reserve will raise rates.

The dollar weakened this month on hopes that the US is nearing the end of its interest rate cycle, although more dovish remarks from policy makers interrupted this trend late last week, which also contributed to Monday’s gains.

The latest bout of China-related risk aversion weighed particularly heavily on the antipodean currencies – often used as liquid proxies for the – with a slide of almost 1% on Monday. It recouped some losses on Tuesday, rising 0.24% to $0.6631.

The dollar fell 0.5% to 7.1412, having gained 0.7% overnight.

In cryptocurrencies, it fell to a new two-year low of $15,479 on Monday, another victim of the rush to the dollar, and also amid tensions over the health of crypto broker Genesis.

Genesis said Monday it has no plans to file for bankruptcy anytime soon, though Bloomberg News reported, citing sources, that Genesis is struggling to raise fresh cash for its lending unit, and warning investors it may need to file for bankruptcy if it doesn’t find it. financing

The lending unit halted redemptions last week, citing the collapse of FTX, which filed for bankruptcy on Nov. 11.



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