US dollar retreats from 9-month high amid rally

Tokyo

THE safe-haven US dollar retreated from more-than-nine-month highs against major peers on Monday as a bounce in Asian stocks lifted sentiment, despite the continued spread of the Delta coronavirus variant.

The US dollar index, which measures the currency against six rivals, declined 0.19 per cent to 93.311 from Friday, when it climbed as high as 93.734 for the first time since Nov 4.

The move came as equities rebounded across the region, with base metals prices up as hopes of an improvement in demand rose after China, the world's top metals consumer, reported no new locally transmitted Covid-19 cases for the first time since July. Wall Street's stronger finish on Friday also underpinned sentiment.

Commodity-linked currencies including the Aussie and Canadian dollar led the rebound against the greenback, following steep declines last week. The Aussie climbed 0.29 per cent to US$0.71575, after reaching a 9½-month low of US$0.71065 on Friday. Against the Canadian dollar, the greenback slipped 0.25 per cent to C$1.2776. It surged to an eightmonth high of C$1.2949 at the end of last week.

Leading crypto currency Bitcoin topped US$50,000 for the first time since mid-May, and last traded 2.06 per cent higher at US$50,333.24.

The US dollar was buoyed this month by a flight to safety as a surge in the fast-spreading Delta variant threatened to derail a global economic recovery, as the Federal Reserve signalled a tapering of stimulus as soon as this year.

Covid-19 considerations prompted the Fed to move its annual Jackson Hole, Wyoming symposium to an online format, to be held this Friday, raising questions about the central bank's broader assessment of the Delta variant's economic impact.

Fed chair Jerome Powell, who has thus far mostly played down the repercussions, gives a speech on the economic outlook at the event, which will be carefully parsed by traders eager for details of the timing and pace of monetary policy tightening.

"I'm thinking the Fed could sound somewhat hawkish at the Jackson Hole symposium this week, so for now the firmness in the US dollar could continue," said Osamu Takashima, head of G-10 FX strategy at Citigroup Global Markets Japan, who anticipates a tapering announcement next month.

"Commodity currencies are rebounding a bit now, but this bounce won't be so large." REUTERS