Dollar Gains Ground on Housing Data as Yuan Struggles

In Asia trade on Wednesday, the U.S. dollar remained strong following better-than-expected U.S. housing data. Meanwhile, the yuan and Aussie dollar were experiencing losses, and all focus turned to Federal Reserve Chair Jerome Powell’s appearance before Congress later in the day.

In May, single-family housing starts surged by 21.7 percent, defying expectations of remaining flat. Although the increase wasn’t driven by a leap in permits, it still gave the dollar a boost ahead of Powell’s testimony.

New US Home Construction Surges by Most in 3 Decades in May

Overnight, the greenback was marginally stronger at $1.0916 per euro and remained steady during the Asia session. The yen also remained firm at 140.50 per dollar, anticipating Bank of Japan Governor Kazuo Ueda’s appearance on Wednesday.

The Aussie and yuan were the biggest losers on Tuesday and showed no signs of bouncing back on Wednesday. China’s rate cut was lower than expected, and with hopes for significant stimulus dwindling as the country’s post-COVID recovery slows, the yuan fell about 0.3 percent overnight. In offshore trade, it remained near a seven-month low at 7.1826 per dollar.

With China’s Premier Li Qiang currently abroad in Europe, traders don’t expect an imminent announcement of further stimulus.

The Aussie, on the other hand, took a further beating due to Tuesday’s less-hawkish-than-expected central bank minutes following a rate hike earlier this month. It fell 0.9 percent overnight and currently sits at $0.6790.

According to Joe Capurso, a strategist at the Commonwealth Bank of Australia, “The path of least resistance is further declines. The Aussie could dip below 0.6700 this week, particularly if Powell is hawkish.” Powell is scheduled to begin his testimony at 1400 GMT.

Following suit, the New Zealand dollar was dragged lower, breaking below its 50-day moving average before stabilizing just above its 200-day moving average at $0.6168. The currency is under pressure after the central bank signaled an end to rate hikes and data revealed the economy is in a recession.

NZ Central Bank Signals Done Raising Rates After Hiking to 14-Year High

According to Mieneke Perniskie, a currency trader at Kiwibank in Wellington, “From here we see further stagnation in growth. Our pick is that the kiwi will head towards the $0.57 level before the year is out, but it won’t be in a straight line. First off the bat, we will need to crack the $0.59 level. That may only be a matter of weeks away.”

Sterling recovered some of its overnight drop, currently sitting at $1.2760. British inflation data is set to be released later in the day, with economists hoping for signs of easing.

The data is likely to be decisive for the Bank of England, which meets on Thursday. Currently, markets are pricing in about a 3/4 chance of a 25 bp hike and a 1/4 chance of a 50 bp hike.

According to Daniela Hathorn, an analyst at Capital.com, “Sterling may halt the current reversal (if) expectations are reshaped, with the pair potentially jumping back above 1.28 and re-testing last week’s resistance at 1.2847.”

The U.S. dollar index remained steady at 102.55. Bitcoin experienced a 5 percent jump overnight, breaking over $28,000 for the first time since late May. This surge was aided by the launch of a new crypto exchange backed by Fidelity, Citadel Securities, and Charles Schwab.

 

Reference

Denial of responsibility! SamacharCentrl is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
Denial of responsibility! Samachar Central is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
DMCA compliant image

Leave a Comment