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Dollar nears 2-week high as Chinese growth slows
THE dollar held near a two-week high on Monday, shrugging off concerns about weakening global growth and data that showed China's economy slowed sharply in 2018.
Going into 2019, weakness in the dollar was a consensus view among currency market traders. The bet was that the US central bank would stop raising interest rates and the economy would slow after a fiscal boost last year.
But the greenback has enjoyed its first weekly gain since mid-December, buoyed by hopes of a thaw in US-China trade tensions and stronger-than-expected set of US industrial production numbers.
The dollar index, which measures its strength against a group of six major currencies, on Monday was steady at 96.388 after climbing to 96.394 per cent on Friday, its strongest since Jan 4.
"The US dollar is benefiting from its role as safe currency haven," said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.
"The Federal Reserve could cushion a weaker economy with monetary policy measures. . . protecting the US quite well from weakening global growth and making the dollar the currency of choice," she added.
US-China trade friction has put pressure on China's economy, with the latest data showing the world's second-biggest economy slowing further in the last quarter of 2018. Markets appeared to take the outcome, largely in line with expectations, in their stride.
The euro nudged up 0.2 per cent to US$1.1376 but remained in close reach of a two-week low of US$1.1353 brushed on Friday.
"We think the euro is cornered on the downside. Our overwhelming bias is to use levels north of US$1.1400 as selling opportunities to aim for a test below the US$1.1300 mark over the coming days," said Stephen Gallo, BMO'S European currency strategy head.
Later in the week, investors will keep a close eye on Thursday's European Central Bank meeting to see if policymakers will react to worsening global economic prospects, yet analysts suggested it may be too early for a change in policy direction.
The pound was steady at US$1.2873.
Over the following week, lawmakers will be able to propose alternatives.
The Australian dollar was steady at US$0.7155 after ending Friday on a loss of 0.3 per cent. The Aussie was largely unfazed by China's growth numbers though analysts agree that any sharp drop in demand from its biggest trading partner would put a dent in local assets.
US financial markets remained closed on Monday for Martin Luther King Jr. Day. REUTERS