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US dollar rebounds as Ukraine tensions ease

H.S. Borji
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US dollar rebounds as Ukraine tensions ease

The US dollar rebounded on Monday, as global risk aversion faded following weekend talks in Berlin among Russia, Ukraine, Germany and France.

The US dollar index, which gauges the greenback’s performance against a basket of major currencies, advanced 0.17 percent to 81.57. The index broke even last week, having failed to generate gains for the first time in a month as investors weighed disappointing US data against escalating violence in Eastern Europe.

The dollar strengthened against the euro, as the EURUSD tumbled 0.28 percent to 1.3363. The pair is likely supported at 1.3338. Initial resistance is likely found at 1.3422, the 20-day exponential moving average.

The dollar advanced against the Japanese yen, as the USDJPY climbed 0.21 percent to 102.56. The pair faces initial support at 102.08 and resistance at 102.68.

The greenback surged against the Swiss franc, as the USDCHF advanced 0.41 percent to 0.9061. The daily chart shows initial support at 0.9006 and resistance at 0.9091.

The dollar was little changed against the loonie, as the USDCAD declined 0.08 percent to 1.0886. The pair faces initial support at 1.0864 and resistance at 1.0925.

The dollar lost ground against the British pound, which faces a heavy release schedule on Tuesday. The GBPUSD advanced 0.24 percent to 1.6731. Initial support is likely found at 1.6678 and resistance at 1.6703.

Risk appetite returned to the markets on Monday following weekend talks among Russian, Ukrainian, German and French foreign ministers. The ministers discussed Russia’s involvement in delivering humanitarian aid to southeastern Ukraine after Ukrainian troops reportedly attacked a Russian convoy late last week.

The news on Friday sent the US dollar tumbling, as investors poured into safe haven assets such as the Japanese yen and Swiss franc.

The foreign ministers reportedly made no progress toward securing a ceasefire between Kiev and pro-Russian forces in the eastern part of the country.

The Ukraine crisis has resulted in thousands of deaths, according to the United Nations, as well as growing tensions between Russia and the West that has resulted in a sanctions war. Earlier this month Russia levied a multi-billion dollar ban on Western food products after the European Union introduced sanctions of its own in July.

Increased risk appetite put downward pressure on gold, which tumbled on Monday. Gold for December delivery fell $7.50 to $1,298.70 an ounce. Spot gold was down $6.69 to $1,298.01 an ounce.

In economic data, the US dollar was supported by firmer housing prospects courtesy of the National Association of Home Builders. US builder confidence rose to a seven-month high this month, as improving labour market conditions continued to bolster expectations for a stronger housing recovery.

NAHB’s sentiment index rose to 55 in August from 53 the previous month, as all three of the gauge’s sub-components improved. Current sales expectations reached the highest level since January, while the index tracking future sales rose to a one-year high.

The Commerce Department will release data on housing starts and building permits on Tuesday, and the National Association of Realtors will release existing home sales figures on Thursday.

Building permits and housing starts are forecast to rebound sharply in July, while existing home sales are expected to ease slightly.

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