US dollar sturdy after four weeks of advances

Singapore

THE US dollar consolidated gains against its rivals on Monday after four consecutive weeks of increases as widening concerns about the Chinese property sector and firm US Treasury yields have encouraged hedge funds to ramp up their long positions.

After spending the second quarter of 2021 on the back foot, the US dollar has received a fresh boost in recent weeks, climbing to its highest levels in a year against its rivals last week, as top investment banks have revised up their forecasts.

Every other major currency weakened against the greenback last week, with traders now firmly eyeing on the US jobs data for September due on Friday to decide on whether the Fed will press the button on its decision to taper its bond purchases.

"The dollar's recent gains boil down to three sources: bets that the Fed will begin its rate hike campaign next year, investors searching for shelter from the equity market storm, and hopes the US economy is heavily shielded from the global power crisis," said Marios Hadjikyriacos, a strategist at brokerage XM.

Citigroup strategists expect more upside in the US dollar due to challenges in the Chinese real estate sector, higher US yields not driven by a global economic recovery and the negative impact for energy importers.

Shares in embattled developer China Evergrande were halted in Hong Kong, rekindling market nerves about the possibility of contagion.

A bullish US dollar is also supported by Kit Juckes, a strategist at Societe Generale, who is bearish on the euro.

The US dollar's gains were more pronounced against some of its top rivals with the greenback scaling a 14-month high on the euro and a 19-month peak versus the yen last week as markets reckoned US interest rates could rise ahead of global peers.

In London trading on Monday, the euro dipped back below US$1.16 and at US$1.1598 is not far from last week's trough at US$1.1563.

Versus a basket of its rivals, the US dollar was broadly steady at 93.96 after gaining for four consecutive weeks, its biggest rising streak since late June, Refinitiv data showed.

Latest weekly positioning data showed hedge funds have increased their US dollar holdings against its rivals to its highest levels since November 2019.

The US dollar's gains has also infused life in the moribund currency volatility markets with a gauge measuring daily swings rising to its highest levels in 2½ months at 6.2 per cent. REUTERS