Published by Rae Wee
SINGAPORE (Reuters) – The dollar eased on Monday but held near a two-year peak, as traders awaited several U.S. economic data this week headed by the December nonfarm payrolls report for further clues on Federal Reserve rate forecast.
In Canada, Prime Minister Justin Trudeau is increasingly likely to announce his intention to resign, although he has not made a final decision, a source told Reuters. The Globe and Mail reported earlier that Trudeau was expected to resign as early as Monday.
Markets seem to have largely priced that in and could welcome an election to clarify things, leaving the US dollar down 0.36% against its Canadian counterpart to C$1.4395.
Also in focus was the Chinese yuan, which on Friday weakened past the psychological level of 7.3 per dollar in the onshore market for the first time in 14 months, after the People's Bank of China (PBOC) strongly defended its did on that main threshold for most of December.
The slide was a 16-month low of 7.3289 per dollar, while its offshore group struggled by 0.06% to 7.3558.
“The PBOC seems to have stopped defending that 7.30 level,” said Ray Attrill, head of FX strategy at National Australia Bank (OTC 🙂 (NAB).
“That just draws a lot more attention to what the PBOC is doing from a stabilization perspective today and in the coming days, in terms of whether they are effectively allowing dollar/CNY to trade up to a higher trading range or not, because I do. think that will have an impact on wider Asian currencies, but also on the and.”
Before the market opened on Monday, the PBOC set the midpoint level, around which the yuan is allowed to trade in a 2% band, at 7.1876 per dollar.
Friday's move lower in the Chinese currency barely affected the Australian and New Zealand dollars, often used as leveraged proxies for the yuan, as they both traded about 0.2% higher in the Asian session.
The Aussie last bought $0.6227, while the kiwi rose 0.22% to $0.56245.
TRUMP AND REPRESENTATIVES
In the broader market, investors looked to Friday's closely watched US jobs report for further clarity on the health of the world's largest economy.
A number of Fed policymakers are also expected to speak this week, where they are likely to repeat comments from their colleagues recently that the fight against deflation is not yet done. .
The dollar has continued to draw strength from expectations of fewer Fed cuts this year, with last week's rise in two years pushing the euro to its weakest level more than two years.
The common currency was last little changed at $1.0310, and eased slightly to 108.89.
Sterling rose 0.13% to $1.2440. The yen fell 0.24% to 157.66 per dollar.
There was also uncertainty over US President Donald Trump's plans for large import tariffs, tax cuts and immigration restrictions when he was inaugurated on January 20, providing additional safe support to the dollar.
“There's still a lot of uncertainty about how quickly we'll see policy announcements and how much the reality matches the rhetoric, so I think that leaves a lot of uncertainty. -certainty in the markets,” said NAB's Attrill.
“It's very difficult to see the US dollar doing any harm…
