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US dollar dips on China reforms

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US dollar dips on China reforms

The US dollar faced broad declines against a basket of its peers after the People’s Republic of China announced it would lessen its role in the yuan market. The Chinese government has played a less direct role in the currency markets since 2005. Since then, the yuan has been allowed to float within a fixed range, helping to make the Chinese currency among the most actively traded.

The dollar index fell 0.2 percent to 80.65, and has backtracked more than half a percent over the previous five sessions. Dollar traders face an active second half of the week, headlined by the minutes of the latest FOMC policy meetings.

In Europe, the common currency jumped 36 pips to 1.3538 US following a mostly upbeat confidence report from ZEW. Germany’s Economic Sentiment Indicator rose to the highest level since October 2009, as institutional investors raise their outlook on the euro area’s largest economy. The outlook on the EURUSD has entered a slightly bullish phase as traders eye the 1.3557 resistance.

Elsewhere in Europe, the British pound remained well bid, holding on to the 1.61 US handle. The GBPUSD fluctuated between 1.6060 and 1.6131 before consolidating north of 1.61. The Bank of England will release the minutes of its latest policy decision November 20. A hawkish reading could propel the pair through the 1.6130/70 resistance bands on its way to 1.62.

Down-under, the Australian dollar rallied on the China news, helping the AUDUSD to advance 40 pips to 0.9418. China is Australia’s top two-way trading partner, accounting for 20 percent of the nation’s total trade value.

In North America, the US dollar broke the 1.0450 CAD resistance zone, as the idle loonie continues to react passively to developments elsewhere in the global economy. Canada will close out the week with several notable data releases, including consumer inflation and retail sales.

In Asia, the US dollar rallied against the Japanese yen to retake the psychological 100 level. The greenback advanced after Japan’s Leading Economic Index—a key gauge of the overall economy—rose in September.

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