- US Dollar Index (DXY) treads water, majors advance
- Yuan rises before FTSE Russell bond index decision
- Japan sees thin holiday trade
The dollar held onto last week’s gains on Monday. The yen and yuan both moved higher, ahead of a barrage of U.S. Federal Reserve speakers this week and before a decision on whether Chinese government bonds would be included in a global index.
Foreigners snapping up Chinese government bonds has helped boost the yuan by over 1% this month, as it climbs back to a 16-month high struck last week rising 0.2% to 6.7648 per dollar.
Should the Chinese government bond be included in the FTSE Russell World Government Bond Index it will likely receive a boost from inflows, supporting the currency. The FTSE Russell is expected to take the decision on Thursday.
China’s benchmark interest rate is also fixed at 0100 GMT. It is expected to remain unchanged for a fifth straight month.
A public holiday in Japan meant trading was light.
The US Dollar index traded at 92.943, approximately middle of the range it has held since mid/late July.
The euro edged up to $1.1847 whilst the pound crawled higher to$1.2933. Concerns over rising covid cases will keep gains limited.
Countries across Europe have brought in tighter restrictions to stem the increase of covid cases. The UK is weighing up a second national lockdown.
The yen extended last week’s gains, advancing 0.07% to 104.50 per dollar. Last week the yen experienced its strongest week of gains since June.
That is close to Friday’s 7 week high as risks from US elections to the global economic recovery saw investors seeking our safer havens.
Fed Chairman Jerome Powell is expected to testify before Congressional committees this week .Fed committee members Charles Evans, Raphael Bostic, Lael Brainard, James Bullard, Mary Daly and John Williams are due to speak
Investors will be listening closely for clues on how they believe the Fed could adopt its more accommodative approach to inflation . This could drive the yen higher if looser monetary policy settings are implied.
The New Zealand dollar traded flat at $0.6762,whilst the Australian dollar added 0.2% to $0.7301 ahead of a Reserve Bank of New Zealand monetary policy meeting later in the week.
No changes to policy are expected at the Wednesday RBNZ meeting, but any hints of negative rates, or adjustments to the bank’s bond-buying programme could drive volatility in the kiwi. Analysts at ANZ are expecting a dovish tone.
