Risk FX Rally, a safe haven offered as Evergrande Fears Ebb

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London — The risk-sensitive Australian dollar has risen and the safe haven yen has fallen to a nearly three-month low on Monday. This is because concerns about widespread market transmission from the debt-bearing Evergrande Group have receded.

Rising commodity prices also helped the Australian and Norwegian crowns, but the yen was under pressure as rising US yields attracted Japanese investors’ money.

The euro remained largely unchanged at $ 1.17205, largely ignoring the progress of German elections over the weekend, and the Social Democratic Party was predicted to slightly beat the conservative block of CDU / CSU.

The dollar index, which measures the US currency against six major rivals, hovered in the middle of last week’s range and traded slightly higher at 93.40.

“Looks like a continuation of last week, high beta is strong, shelters are by far behind, the FX market continues to improve our broader sentiment, and stocks lose two weeks. Michael Brown, Senior Market Analyst at Caxton FX, said:

In anticipation of U.S. monetary tightening policy, the U.S. Yields have risen to their highest since early July.

An analyst at the Commonwealth Bank of Australia said, “The US dollar is likely to be caught up in the hawkish FOMC sidestream, diminishing concerns about the possibility of an Evergrande default.”

“Nevertheless, the risks are biased towards a stronger US dollar,” they said, as new Evergrande concerns are unlikely to cause levels of market volatility last week.

Concerns that China’s second-largest developer, Evergrande, could default to $ 305 billion have cast a shadow over trade in recent weeks, but some of these threats of transmission have been cast. I’m retreating.

Suzhou building
The house under construction can be seen in a project developed by the China Evergrande Group on September 23, 2021 in Suzhou, Jiangsu Province, China. (AlySong / Reuters)

The yen fell to 110.81 per dollar, comparable to the July 7 lows and traded at 110.645, a slight rise from the end of last week.

This followed benchmark 10-year Treasury yield movements, reaching 1.4660% on Monday’s second day, hitting a record high since July 2nd and then returning to 1.4527%.

“The correlation between US bond yields and USDJPY has recovered,” wrote Chris Weston, head of research at Melbourne securities firm Pepperstone, in a client note.

“USDJPY seems to be growing a bit, so I’m cautious about chasing it here, but I’m looking for a retest of 110.50 as a potential support zone that is gradually becoming bullish.”

Australia rose 0.37 percent to $ 0.72835, up from $ 0.72205 a week ago, the lowest since August 24th.

Norwegian krone rose about 0.4% to 8.5493 ​​per dollar for the first time since July 6.

The Canadian dollar rose about 0.3% per greenback to 1.2622 Canadian dollars.

These rises were driven by the rise in Brent crude oil on the fifth day, closing at $ 80 a barrel and rising iron ore, copper and other industrial metals.

This week, the focus will be on central bank speakers, and on Tuesday, Federal Reserve Board Chair Jerome Powell will join Treasury Secretary Janet Yellen to speak to Congress.

The European Central Bank will host an annual forum on Tuesday and Wednesday, with ECB Governor Christine Lagarde not only opening the first day, but also participating in a panel discussion with Powell, Haruhiko Kuroda, Governor of the Bank of Japan and Andrew Bank Governor on the second day. To do. Bailey.

($ 1 = 6.4662 Chinese RMB)

By Ritvik Carvalho

Reuters

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