LONDON, Sept. 24 (Reuters) – The dollar hovered above a one-week low against its major peers on Friday, taking a break from its biggest drop in nearly a month overnight, as questions remained about the fate of property developer China Evergrande Group (3333 .HK).
The yen fell to its lowest since mid-August as Treasury yields hit their highest level since early July.
The dollar index, which measures the greenback against a basket of six rivals, rose 0.08% to 93.175 after slipping 0.36% on Thursday and touching its lowest since Sept. 17 at 92.977. That erased the gains for the week and set the index down 0.09%.
The safe haven dollar was hit after Beijing pumped new liquidity into the financial system on Thursday, when Evergrande announced it would pay interest on an onshore bond.
However, some holders of its offshore bonds said they did not receive coupons before Thursday’s deadline. More dollar bond interest is due next week. Read more
The dollar gained 0.16% to 110.57 yen for the first time since August 11 as benchmark US Treasury yields climbed to 1.452% in Tokyo, a level not seen since July 2. Yields last traded at 1.4320%.
The Bank of England’s (BOE) hawkish comments on Thursday pushed yields up globally, a day after the US Federal Reserve said it could start cutting monthly bond purchases as early as November and that interest rates could rise faster than expected over the next year. Read more
The BOE said two of its policymakers voted to end government bond purchases early in the era of the pandemic and that markets have raised their expectations for an interest rate hike to March.
“The fate of Evergrande remains uncertain, but the markets are now less concerned about any potential systemic impact, leaving room for risky assets to recover,” said Francesco Pesole and Chris Turner of ING in a morning note to clients. .
“Improving sentiment weighed on the dollar, which also reduced the reluctance of markets to match the Fed’s Dot Plot.”
The British pound was little changed at $ 1.3717 after rising to $ 1.3750 overnight for the first time since September 20.
The euro was also broadly flat at $ 1.1738, after recovering from a more than a month low of $ 1.16835 reached on Thursday.
The risk-sensitive Australian dollar fell 0.2% to $ 0.7280 after hitting a one-week high at $ 0.73165.
Westpac expects the dollar index to stagnate at slightly higher at the end of the year, but remain within a range of 92.0 to 93.5 in the near term.
“The clear signal to cut from the Fed and the gradual advance of rate hike plans, not to mention the lingering uncertainty around Evergrande, should contain the downsides,” Westpac strategists wrote in a report.
Meanwhile, the National Australia Bank said a sharp drop in dollar sentiment would be needed to meet its year-end target of 89.6 for the dollar index, “and there is no obvious short-term triggers “for this, the strategists wrote in a research note.
Several Fed officials are scheduled to speak on Friday, including President Jerome Powell, who will deliver opening remarks at a Fed Listens event.
Reporting by Ritvik Carvalho; Additional reporting by Kevin Buckland in Tokyo, edited by Timothy Heritage
Our Standards: The Thomson Reuters Trust Principles.