LONDON (Reuters) – The dollar fell against a basket of major currencies on Tuesday after China raised its official yuan exchange rate to its highest level in 30 months, supporting demand for other currencies.
The central bank of China set the official yuan center at $ 6.4760 per dollar before the market opened, an increase of% from the previous correction, also the biggest change since 2005.
(Chart: China sets the yuan center strongest in 30 months 🙂
In the foreign market, the yuan strengthened to 6.4419 for the first time since June 2018. It started the week at 6.4944.
“If the Chinese currency rises, it will provide some support to Asian currencies in general, and I suspect that is why the US dollar is partially reversing the gains we saw in Wall Street time,” Ray Attrill said. head of FX, said. strategy at the National Australia Bank in Sydney.
“It’s a very big step by any historical standard, and I do not think you can ignore it.”
While investors were wary of the rise in the yuan, Tuesday led to a later sale of the Chinese currency, the PBOC’s actions nevertheless increased risk sentiment in the foreign exchange markets.
Under the G10 currencies, the Australian dollar led gains as the move by the People’s Bank of China (PBOC) encouraged broad dollar sales.
The dollar index weakened 0.2% to 89,731. It fell to as low as 89,415 on Monday for the first time since April 2018, but ended the day with a 0.1% rise after US stocks slipped.
Earlier, the dollar found support as concerns about rising COVID-19 cases and uncertainty over U.S. by-elections in Georgia spurred a decline in U.S. stocks from record highs and fueled demand for safer assets.
Yet strategists appear to be convinced of long-term weakness for the dollar.
“While rising COVID cases remain the main short-term risk, as was the case in the latter part of 2020, the market continues to focus on the prospects of the vaccine and the eventual global economic recovery,” ING Bank said in a note. said to customers.
“While a possible Democratic victory (in Georgia) could raise concerns about more regulation, it could at least be exceeded in the coming months by expectations of greater fiscal stimulus, thus supporting risk assets and keeping the dollar weak in the coming months. “
The Aussie dollar, a barometer of risk appetite that also tends to follow the yuan, jumped 0.7% to 77.18 US cents during trading in London, and the 2-1 / 2 year peak of 77.43 closer on the last day of 2020.
The dollar fell 0.3% to 102.86 yen. It dropped to 102,715 on Monday for the first time since March.
The euro rose 0.2% to $ 1.22765 after reaching $ 1.231 on Monday, the highest since April 2018.
The British pound rose 0.1% to $ 1.3573.
Sterling has been rocked by an increase in infections from a rapidly spreading new coronavirus strain in the UK, with Prime Minister Boris Johnson recommending another nationwide exclusion.
It declined 0.73% on Monday, the most since December 10, after rising earlier to $ 1.3703, a level not seen since May 2018.
Bitcoin is trading at $ 31,367 after a roller coaster ride to kick off the new year which took it to a record high of $ 34,800 on Sunday, followed by a tumble to as low as $ 27,734 the next session.
Reporting by Ritvik Carvalho; additional reporting by Kevin Buckland in Tokyo; Edited by Larry King