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Dollar retreats from 9-month high as stock rally lifts sentiment

Dollar retreats from 9-month high as stock rally lifts sentiment

FILE PHOTO: Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/File Photo

TOKYO : The safe-haven dollar retreated from more-than-nine-month highs against major peers on Monday as a bounce in Asian stocks lifted sentiment, despite the continued spread of the Delta coronavirus variant.

The dollar index, which measures the currency against six rivals, declined 0.19per cent to 93.311 from Friday, when it climbed as high as 93.734 for the first time since Nov. 4.

The move came as equities rebounded across the region, with base metals prices up as hopes of an improvement in demand rose after China, the world's top metals consumer, reported no new locally transmitted COVID-19 cases for the first time since July. Wall Street's stronger finish on Friday also underpinned sentiment.

Commodity-linked currencies including the Aussie and Canadian dollar led the rebound against the dollar, following steep declines last week.

The Aussie climbed 0.29per cent to US$0.71575, after reaching a 9 1/2-month low of US$0.71065 on Friday.

Against the Canadian dollar, the greenback slipped 0.25per cent to CUS$1.2776. It surged to an eight-month high of CUS$1.2949 at the end of last week.

Leading cryptocurrency bitcoin topped US$50,000 for the first time since mid-May, and last traded 2.06per cent higher at US$50,333.24.

The dollar has been buoyed this month by a flight to safety as a surge in the fast-spreading Delta variant threatens to derail a global economic recovery, at the same time as the Federal Reserve is signaling a tapering of stimulus as soon as this year.

COVID-19 considerations prompted the Fed to move its annual Jackson Hole, Wyoming symposium to an online format, to be held this Friday, raising questions about the central bank's broader assessment of the Delta variant's economic impact.

Fed Chair Jerome Powell, who has thus far mostly played down the repercussions, gives a speech on the economic outlook at the event, which will be carefully parsed by traders eager for details of the timing and pace of monetary policy tightening.

"I’m thinking the Fed could sound somewhat hawkish at the Jackson Hole symposium this week, so for now the firmness in the U.S. dollar could continue," said Osamu Takashima, head of G10 FX strategy at Citigroup Global Markets Japan, who anticipates a tapering announcement next month.

"Commodity currencies are rebounding a bit now, but this bounce won’t be so large."

Even if the Fed comes out more dovish, delaying a taper would not necessarily dent the currency, according to National Australia Bank (NAB).

"This can just as easily play out USD positive as negative, from a risk sentiment/safe-haven USD demand perspective," Ray Attrill, NAB's head of currency strategy, wrote in a client note.

Meanwhile, rising infections and new restrictions in Australia and New Zealand are keeping those currencies heavy, according to the note.

"It remains premature to call an end to this down move" in the Aussie, Attrill said.

New Zealand's kiwi was flat at US$0.68385, close to the 9 1/2-month low of US$0.6807 reached Friday, with the nation under lockdown as it struggles to contain a Delta outbreak.

Meanwhile, about 60per cent of Australia's population of 25 million is under lockdown, with infections at a record.

South Korea and Vietnam have also extended or tightened restrictions, while Japan shifted strategy by tripling COVID-19 tests as daily new infections soared to a record on Friday.

The yen, another safe haven, was largely unchanged at 109.85 per dollar, consolidating in the centre of the trading range of the past month and a half.

The euro appreciated 0.18per cent to US$1.17195, off Friday's 9 1/2-month trough of US$1.1664.

Sterling added 0.18per cent to US$1.36475, up from a one-month of US$1.3602 at the end of last week.

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Currency bid prices at 0457 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

US$1.1719 US$1.1699 +0.18per cent -4.08per cent +1.1724 +1.1694

Dollar/Yen

109.8500 109.8200 +0.02per cent +6.34per cent +109.9300 +109.8250

Euro/Yen

128.75 128.41 +0.26per cent +1.44per cent +128.8000 +128.4200

Dollar/Swiss

0.9163 0.9169 -0.04per cent +3.59per cent +0.9177 +0.9158

Sterling/Dollar

1.3648 1.3620 +0.18per cent -0.13per cent +1.3654 +1.3610

Dollar/Canadian

1.2772 1.2811 -0.27per cent +0.33per cent +1.2832 +1.2769

Aussie/Dollar

0.7160 0.7138 +0.31per cent -6.92per cent +0.7165 +0.7120

NZ

Dollar/Dollar 0.6842 0.6840 +0.00per cent -4.75per cent +0.6856 +0.6820

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Kevin Buckland; Editing by Christopher Cushing & Shri Navaratnam)

Source: Reuters

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