© Reuters.
Por Geoffrey Smith
Investing.com – The dollar opens the week with a downward trend after news of an interest rate cut in China that will support risk assets.
At 9:15 AM ET, the {{Dollar Index}}, which tracks the dollar against a basket of six other majors, is down 0.1% at 95.10, raising its losses so far this year to 0.5%. Its only notable gain came against the yen, a day before the Bank of Japan’s monetary policy meeting. The pair is up 0.2% to the 114.35 level.
The biggest gains are in commodity-linked currencies, with the Australian dollar up 0.1% to 0.7214, while the Australian dollar is down 0.2% at 1.2523 Canadian dollars.
The yuan rose 0.1% to 6.3491 per dollar, still near its three-year high, after the People’s Bank of China cut its one-year interest rates for the first time in almost two years, 0.1% to 2.85%.
The measure is implemented on the same day that new data showed that the Chinese economy slowed down in the fourth quarter, as a series of confinement measures related to Covid-19 and the spread of the crisis in the real estate sector, which is key have affected both production and consumption.
China’s retail sales slowed sharply in December, although industrial production and fixed asset investment remained slightly above forecast.
The persistence of lockdown measures this year, coupled with signs of easing in inflation, have fueled expectations of further monetary policy easing by the People’s Bank of China, in stark contrast to much of the rest of the world. world, where central banks are struggling to curb inflation.
Short-term interest rate futures in Europe imply that even the European Central Bank will be forced to raise its benchmark interest rates before the year is out, despite strong signals to the contrary from higher bank managers.
In Europe, the euro and sterling were unable to break past two-month highs hit last week, opening the week adrift. The euro rose 0.1% to $1.1425 while the British pound posted a 0.1% gain to $1.3682, undeterred by data suggesting the first Minister Boris Johnson could be forced to leave his post due to repeated breaches of the Covid regulations, both by himself and by his staff.
