U.S. dollar dips from 9-1/2-month high but near-term outlook

U.S. one dollar and Chinese Yuan are seen in this illustration taken (Photo : REUTERS/Dado Ruvic/Illustration)

The safe-haven U.S. dollar slipped from a 9-1/2-month high on Friday, as risk appetite improved with equities gaining and benchmark Treasury yields higher, although the near-term outlook for the greenback remained upbeat.

The U.S currency remained supported overall by concerns that the coronavirus Delta variant could derail global economic recovery just as central banks begin to reverse COVID-19 pandemic-related stimulus.

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The dollar index, which measures the U.S. currency against six rivals, rose to as high as 93.734 for the first time since early November, before trading 0.1% lower at 93.491. For the week, it posted a 1% gain, the most in two months.

While moves in currency markets were much more contained than on Thursday as equity markets steadied, the risk-sensitive Australian and New Zealand dollars were mixed, but their overall bias remained tilted to the downside.

"In the near term, we expect the dollar to appreciate a bit further," wrote Jonas Goltermann, senior markets economist at Capital Economics, in his latest research note. "We think that robust growth in the U.S. relative to other major economies and a gradual tightening of monetary policy will put further upward pressure on the greenback."

Minutes of the Fed's July meeting, released on Wednesday, showed officials largely expect to reduce their monthly bond buying later this year.

The Australian dollar sank to a new 9 1/2-month low of US$0.7107, and was down 0.2% at US$0.7137. On the week, the Aussie fell 3.3%, its worst weekly performance since September 2020, as a COVID-19 lockdown on Sydney was extended by a month.

New Zealand's Kiwi dollar dipped to a new nine-month trough of US$0.6807 at one point. It last traded up 0.2% at US$0.6838. The government on Friday extended a snap COVID-19 lockdown that delayed the central bank raising interest rates this week.

The Canadian dollar dropped to an eight-month low of C$1.2948 per U.S. dollar and was last at C$1.2840, down 0.1% against its U.S. counterpart as oil prices fell further because of worries about the global economy.

Norway's crown dropped for a second day as weaker oil prices and general nervousness among investors hit the currency despite the Norwegian central bank on Thursday sticking to its plan for a September interest rate hike. The euro was last flat at 10.56 crowns.

The euro was up 0.2% at $1.1697, not far from the 9-1/2-month low of $1.1665 reached overnight.

Against the yen, another safe-haven currency, the dollar was flat at 109.80 yen.

Sterling slipped to one-month lows versus the dollar, and last down 0.1% at $1.3622.

Emerging markets have also had a bruising week. A regulatory crackdown in China and the concerns over growth and COVID-19 have sent investors looking for safer assets.

The Chinese yuan sank to a new three-week low of 6.51 per dollar in the offshore market before trading flat at 6.499.

Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

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Currency bid prices at 3:30PM (1930 GMT)

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

Previous Change

Session

Dollar index 93.4650 93.5750 -0.11% 3.872% +93.7340 +93.4400

Euro/Dollar $1.1698 $1.1677 +0.18% -4.26% +$1.1705 +$1.1664

Dollar/Yen 109.8050 109.7600 +0.05% +6.28% +109.8800 +109.5700

Euro/Yen 128.44 128.12 +0.25% +1.20% +128.5200 +127.9500

Dollar/Swiss 0.9173 0.9188 -0.13% +3.72% +0.9189 +0.9160