The dollar rose 0.2% to 114.45 yen, nearly 0.8% above a Friday low and also edged about 0.1% firmer on the euro to $1.1403
The dollar clung to a late week bounce on Monday as investors braced for January’s U.S. Federal Reserve meeting and raised bets it will chart a year ahead holding several rate hikes, while China surprised analysts with a benchmark cut.
Chinese economic growth data, due later on Monday at 0200 GMT, a Bank of Japan policy meeting which concludes on Tuesday, British inflation data on Wednesday and Australian jobs figures on Thursday are also in view as traders gauge the global policy outlook.
The dollar rose 0.2% to 114.45 yen early in the Asia session, nearly 0.8% above a Friday low. It also edged about 0.1% firmer on the euro to $1.1403.
The moves follow the dollar’s jump on Friday along with U.S. yields and underscore support for the greenback from the hawkish rates outlook, even if momentum for gains has started to wane.
The U.S. dollar index, which fell sharply last week until Friday’s jump, sat at 95.225 in Asia on Monday.
Friday’s move suggest to me that the interest rate driver for dollar strength is not dead and buried, said National Australia Bank’s head of foreign exchange strategy Ray Attrill.
He said it may not necessarily return to drive new dollar highs, but added: We’ve had a hawkish twist out of every Fed meeting since June last year.
The Fed meets Jan. 25-26 and is not expected to move rates, but there is a growing drumbeat of hawkish comments coming from within and outside the central bank.
The Australian and New Zealand dollars, which dropped sharply on Friday, remained under pressure on Monday. The Aussie was last down 0.2% at $0.7200, ending for now a brief foray above resistance around $0.7276.
The kiwi edged 0.2% lower to $0.6791.
In China, bonds rallied and the yuan dropped after the central bank cut borrowing costs for medium-term loans for the first time since April 2020, defying market expectations.
Ten-year government bond futures rose to their highest since June 2020 after the move and the yuan began onshore trade marginally softer at 6.3555 per dollar.
