Dollar drifting as week kicks off

Currencies are sleepless in Singapore

Currency markets limped to the close in New York on Friday, with a rise in US yields reversing the US dollar’s early losses and leading most majors to an almost unchanged close. The dollar index rose 0.21% to 92.28, easing modestly to 92.24 in directionless Asian trading with the index locked in a 92.00 to 92.50 range.

EUR/USD is unchanged at 1.1722 today and its key levels at 1.1680 and 1.1660 below, and 1.1750 above. GBP/USD is also unchanged from Friday at 1.3675, its Friday rally running out of steam ahead of resistance at 1.3750. With news that the government is looking at conscripting the army into the fuel delivery business, the UK energy woes will likely cap gains in Sterling. A failure of critical support at 1.3610 potentially signals another 300 points lower. USD/JPY climbed 0.35% to 110.70 on Friday before fading to 110.55 in Asia today. USD/JPY remains a yield differential play, ignoring politics in Japan. If US yields firm again this week, USD/JPY could test resistance at 110.80 which would signal more gains to 111.70 initially.

Rising commodity prices, diminishing Evergrande fears, and state reopening plans have lifted AUD/USD 0.35% higher to 0.7285 today, after both it and NZD/USD fell 0.80% on Friday as risk-proxy indicators. Because of that, both Antipodeans remain acutely vulnerable to more selling pressure if news out of China takes another turn for the worse. As such, both likely remain sell-on rallies for the first few days this week and definitely so if China’s Thursday PMI data is very weak.

Another neutral USD/CNY fixing and liquidity injection by the PBOC has left Asian currencies free to follow improving risk sentiment. That has seen regional currencies rally across the board versus the US Dollar today. USD/KRW has fallen 0.35% to 1175.80, USD/CNY by 0.10% to 6.4590 while the Indonesian Rupiah, Malaysian Ringgit, Thai Baht and Singapore Dollar have all recorded small gains. Like the Australian and New Zealand Dollars, Asian FX will move to the nuances of swinging fear aversion levels this week. Negative developments on Evergrande could quickly see today’s gains disappear.

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