Monday, 31 August 2015 21:01
NEW YORK: The dollar eased against the safe-haven yen and the low-yielding euro on Monday as investors around the world knocked down equities and trimmed bets against currencies popularly used to fund risky carry trades.
Under carry trades, investors sell a low-yielding currency to buy riskier, higher-yielding ones for better returns. When volatility rises in global financial markets and stocks fall, they tend to take these positions off the table.
European shares fell, with Germany’s DAX and France’s CAC on track for their worst month in four years. Chinese stock markets also fell, and Wall Street indexes were off 1 percent in early New York trading.
“Stock markets are in focus, and absence of risk appetite is acting as a headwind to the dollar,” said Nordea FX strategist Niels Christensen. Volumes were relatively low.
London was shut for a holiday, and traders were awaiting Friday’s key US employment report for August, that may hint at whether the Federal Reserve will lift interest rates in September.
Fed Vice Chairman Stanley Fischer said in a speech at the annual central bankers’ meeting in Wyoming on Saturday that US inflation was likely to rebound as pressure from the dollar fades, allowing the Fed to raise rates gradually.
That revived hopes for a September rates hike and helped the dollar rise against some other currencies, such as the British pound and the Swiss franc, according to Win Thin, global head of emerging markets at Brown Brothers Harriman & Co in New York. “Fischer pushed back against the dovish sentiment,” Thin said, “and that gave the dollar some traction.” The dollar index, which tracks the greenback against a basket of six major currencies, was flat on the day and more than 1 percent lower for the month.
It was well above a seven-month low of 92.621 reached a week ago as the prospect of a slowdown in China sent global stocks plunging.
The dollar shed 0.5 percent to 121.11 yen, down about 2.2 percent for August but well above a seven-month low of 116.15 touched a week ago.
The euro rose 0.5 percent to $ 1.1236 , below last week’s high of $ 1.1715 but still up 2.4 percent for the month.
The dollar was up 0.3 percent against the Swiss franc to 0.9652 franc and off 0.1 percent against the pound at $ 1.5407.
