Dollar nears two-week high as Chinese growth slows
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[January 21, 2019]
By Tom Finn
LONDON (Reuters) - 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 U.S. 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 U.S.-China trade tensions and
stronger-than-expected U.S. industrial production numbers.
The dollar index, which measures its strength against a group of six
major currencies, on Monday was steady at 96.388 <.DXY> after climbing
to 96.394 percent on Friday, its strongest since Jan. 4.
"The U.S. dollar is benefiting from its role as safe currency haven,"
said Esther Maria Reichelt, an FX strategist at Commerzbank in
"The Federal Reserve could cushion a weaker economy with monetary policy
measures... protecting the U.S. quite well from weakening global growth
and making the dollar the currency of choice," she added.
U.S.-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 percent to $1.1376 <EUR=EBS> but remained in
close reach of a two-week low of $1.1353 brushed on Friday.
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A U.S. Dollar note is seen in this June 22, 2017 illustration photo.
"We think the euro is cornered on the downside. Our overwhelming bias is to use
levels north of $1.1400 as selling opportunities to aim for a test below the
$1.1300 mark over the coming days," said Stephen Gallo, BMO'S European currency
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
The pound was steady at $1.2873 <GBP=D3>.
British Prime Minister Theresa May will on Monday put forward a motion on her
proposed next steps regarding Brexit. Over the following week, lawmakers will be
able to propose alternatives.
The Australian dollar was steady at $0.7155 <AUD=D4> after ending Friday on a
loss of 0.3 percent.
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.
U.S. financial markets remained closed on Monday for Martin Luther King Jr. Day.
Graphic: World FX rates in 2018 - http://tmsnrt.rs/2egbfVh
(Reporting by Tom Finn; Additional reporting by Shinichi Saoshiro in Tokyo,
Editing by Raissa Kasolowsky and Ed Osmond)
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