Dollar Up, but Remains Near Week Low Even as Risk Sentiment Slowly Improves

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By Gina Lee

AiVIF.com – The dollar was up on Friday morning in Asia, but remained near its lowest level in a week. Improving risk sentiment, as concerns about contagion from a potential China Evergrande Group default eased somewhat, erased the U.S. currency’s recent gains.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.08% to 93.105 by 11:11 PM ET (3:11 AM GMT).

The USD/JPY pair inched up 0.10% to 110.41.

The AUD/USD pair inched up 0.03% to 0.7297 while the NZD/USD pair inched down 0.02% to 0.7065.

The USD/CNY pair inched up 0.04% to 6.4614 and the GBP/USD pair inched up 0.05% to 1.3723.

The People’s Bank of China injected fresh cash into the financial system on Thursday, a day after China Evergrande said it would make interest payments on an onshore bond. However, it was not clear whether the developer made coupon payments on dollar bonds due on Thursday, with more payments due in the following week.

However, risk sentiment took its cues from news around China Evergrande, according to some investors. “Chinese authorities are readying restructuring teams, alleviating fears of a Lehman's-type moment," National Australia Bank (OTC:NABZY) (NAB) analyst Tapas Strickland said in a note.

Two BOE policymakers voted to begin asset tapering, but the central bank kept its interest rate unchanged at 0.10A% as it handed down its policy decision on Thursday.

Elsewhere in Europe, Norges Bank raised its interest rate to 0.25% from the previous month’s 0% as it also handed down its policy decision on Thursday. More hikes could follow in the coming months, according to governor Oystein Olsen.

The U.S. Federal Reserve also hinted that asset tapering could begin in November, with interest rate hikes following in 2022, when it handed down its own policy decision on Wednesday.

"The hawkish soundings from BOE and Norgesbank reinforce the hawkish tilt in the Fed's dot plot. BOE appeared to open the door to an interest rate hike before the end of 2021," said NAB's Strickland in his note.

Several Fed officials, including Chairman Jerome Powell who will give the opening remarks, are due to speak at a Fed Listens event later in the day.