Publications
Partners
Sydney - The dollar maintained gains that drove it to its strongest in at least a decade last week, as its allure as a growth asset was enhanced by China’s faltering economy.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, surged the most since March on Friday amid speculation the Federal Reserve will lift interest rates next month after a robust US payrolls data.
The greenback extended its advance against the yen for a sixth session to its highest since August 21 on Monday.
The dollar climbed versus South Korea’s currency after China on Sunday reported exports and imports that contracted more than economists forecast. Chinese data on inflation, retail sales and industrial output are due this week.
“The dollar is staying at elevated levels broadly as markets sustain the view for a December rate hike,” said Hiroshi Yanagisawa, a dealer at FX Prime by Gmo in Tokyo. “Markets seem to be shifting to the view the solid US economy justifies a rate hike.”
The Bloomberg Dollar Spot Index was little changed at 1 231.13 as of 08:41 after climbing 1.1% on Friday, the most since March 19. The greenback advanced 0.2% to ¥123.33 after touching ¥123.48, and was up 1.4% at 1 157.44 won. The US currency declined 0.3% to $1.0769 per euro.
China’s overseas shipments dropped 6.9% in October in dollar terms, the customs administration said Sunday, a bigger decline than estimated by all 31 economists in a Bloomberg survey.
Weaker demand for coal, iron and other commodities from declining heavy industries helped push imports down 18.8%, leaving a record trade surplus of $61.6bn.
The Asian nation’s economic outlook contrasts with the US’s. Payrolls in October gained the most this year and exceeded all estimates in a Bloomberg survey of economists. The jobless rate fell to a seven-year low of 5%, and average hourly earnings over the past 12 months climbed by the most since 2009.
There was a 70% probability seen on Friday that the Fed will raise its benchmark rate at its December meeting, according to futures data compiled by Bloomberg. That’s up from 56% before the jobs report’s release and a 35% probability of a December increase on October 27, the day before the Fed concluded its last policy meeting.
The calculation assumes the effective fed funds rate averages 0.375% after the first increase.
“There’s certainly more room for the US dollar to rally with the market only pricing a 70% chance of a rate hike in December by the Fed,” said Joseph Capurso, a Sydney-based strategist at Commonwealth Bank of Australia.
“Further weakness in the Chinese data would undermine the commodity currencies and emerging market Asian currencies in coming months.”
