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Aussie jumps, safe-haven dollar and yen ease amid Shanghai reopening signs

Aussie jumps, safe-haven dollar and yen ease amid Shanghai reopening signs

Arrangement of various world currencies including Chinese Yuan, US Dollar, Euro, British Pound, pictured Jan 25, 2011. (File photo: REUTERS/Kacper Pempel/Illustration)

TOKYO: The safe-haven dollar and yen eased on Thursday (May 19) while the Australian and New Zealand dollars jumped amid signs of an easing in Shanghai's coronavirus lockdown, although sentiment remained fragile as global equities sold off.

Shanghai will allow more businesses in some areas to resume normal operations from the start of June, an official said, stirring hopes for an end to a crippling weeks-long lockdown under the government's strict zero-COVID policy.

That helped lift the mood in a market that was badly bruised on Wednesday by mounting concerns that aggressive tightening by the Federal Reserve and other global central banks could choke growth.

The Aussie gained 0.8 per cent to US$0.7008, just above the psychologically important 70 cent level, getting additional support from a tick down in Australian unemployment to the lowest in almost half a century. Overnight, the currency had retreated 1.1 per cent from a high of US$0.7046.

New Zealand's kiwi bounced 0.6 per cent to US$0.6334, after losing 1.1 per cent overnight from a top of US$0.6370.

Preeminent haven currency the yen slid, with the dollar adding 0.48 per cent to 128.845 yen after a 0.86 per cent tumble on Wednesday.

The dollar index, which tracks the greenback against six major peers, edged 0.16 per cent lower to 103.63, after a 0.55 per cent jump overnight that ended a three-day losing streak.

Despite the moves in foreign exchange markets, a 1.9 per cent slide in Asian stocks was evidence that risk aversion was still front of mind, a day after a 4 per cent drop for the S&P 500 and a 5 per cent plunge for the Nasdaq, said Ray Attrill, head of currency strategy at National Australia Bank.

"Zero-COVID is here to stay, so to me the China outlook is no less grim today than it was yesterday," he said.

"The macro backdrop that is supporting the dollar, either on relative interest rate grounds or on risk aversion, one or other of those forces is going to remain in play for the time being, so I don't see a meaningful decline from these levels" in the dollar index, he said.

Poor US housing data on Wednesday added to slowdown concerns, and Fed Chair Jerome Powell had ratcheted up the hawkish rhetoric the previous day by saying the US monetary authority would push interest rates as high as needed to stem a surge in inflation that he said threatened the foundation of the economy.

Powell's stance "makes it hard to achieve a 'soft landing' for the US economy given the long lags between changes in monetary policy and changes in inflation," Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney, wrote in a client note. "The darkening outlook for the US economy supports the USD and safe-haven currencies."

The euro rebounded 0.38 per cent to US$1.0501 after Wednesday's 0.84 per cent slump.

Sterling got some respite with a 0.37 per cent gain to US$1.23905, after dropping 1.2 per cent overnight as a surge in UK inflation to a 40-year record fostered worries for a sharp economic slowdown.

Source: Reuters/fh


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