©Reuters. Illustrative file image of US dollar and Chinese yuan bills taken on February 10, 2020. REUTERS/Dado Ruvic/Illustration/File
Por Saikat Chatterjee
LONDON (Reuters) – The US dollar and the Australian dollar came under pressure on Monday from weak Chinese economic data, while the US dollar consolidated gains near a 20-year high.
* The euro moved away from lows after comments from ECB chief Francois Villeroy de Galhau that euro weakness could threaten the European Central Bank’s efforts to bring inflation closer to its target, but sentiment was bearish.
* China’s manufacturing and retail activity fell sharply in April as extensive COVID-19 lockdowns kept workers and consumers at home. The Chinese offshore yuan was hovering near a low hit last week at 6.8380 yuan, its lowest level since September 2020.
* “Increasingly, the risk is that China’s zero-COVID (policy) could continue beyond the party conference, into the third quarter and into the winter season,” said strategists at Barclays (LON:) in a note lowering its forecasts for the euro and the yuan for the rest of 2022.
* “As such, it can lead to persistent mobility restrictions, as omicron is notoriously difficult to contain.”
* The Australian dollar fell 0.68% due to its exposure to the Chinese economy. In London trading it trimmed its losses, but was down 0.5%.
* He was trading at 104.57, having briefly crossed the 105 level on Friday, his highest since December 2002, after six successive weeks of gains. Weekly positioning data showed investors increased their long bets on the dollar.
* The euro was marginally higher at $1.0422 but not far from Thursday’s low of $1.0354, its lowest level since early 2017. Analysts see $1.0340 as a crucial support level. for the euro.
* HSBC strategists expect the euro to fall to parity with the dollar in the coming year. “Much weaker growth and much higher inflation leave the ECB facing one of the toughest policy challenges (for central banks) in the G10,” they said.
* Cryptocurrency markets, which trade 24 hours a day, had a quiet weekend after last week’s turmoil fueled by TerraUSD, one of the so-called “crypto stablecoins”, which broke its parity with the dollar, although fell in early trading on Monday
* It was trading around $29,500, down more than 5%, after falling as low as $25,400 on Thursday, its lowest since December 2020.
(Reporting by Saikat Chatterjee; additional reporting by Alun John in Hong Kong; Editing in Spanish by Ricardo Figueroa)