The dollar wallowed near its lowest level in a week. This is because, the improved risk sentiment wiped out recent gains amid easing concerns about contagion from a potential China Evergrande Group default. Risk appetite returned, lifting oil and global equities. The 10-year U.S. Treasury notes hit the highest since July overnight at 1.437%. That failed to help the greenback.
Tapas Strickland, an analyst at National Australia Bank, wrote in a client note that the risk sentiment was unperturbed by the move in yields, instead taking its lead from news around Evergrande. Chinese authorities are readying restructuring teams, alleviating fears of a Lehman’s-type moment. Beijing injected fresh cash into its financial system. This is after the Evergrande announced that it would make interest payments on an onshore bond. The mood improved, weighing on other safe havens like the yen and lifting commodity-linked currencies like the Australian dollar. The yen eased 0.05% to 110.385 per dollar. And the euro added 0.05% to $1.1743. The Aussie rose 0.21% to $0.73105. Meanwhile, sterling was 0.07% higher at $1.3734.
The BOE said that the two of its policymakers had voted for an early end to pandemic-era government bond. Norway’s crown was also little changed. This is because the country’s central bank raised its benchmark interest rate. The Federal Reserve said that it could begin reducing its monthly bond purchases by as soon as November. It also expects a quick rise in interest rates. NAB’s Strickland said that the hawkish soundings from the BOE and Norgesbank reinforce the hawkish tilt in the Fed’s dot plot. The Bank of England appeared to open the door to an interest rate hike before the end of the year.