US dollar holds modest gains, offshore yuan rises as Jackson Hole is in view

US dollar holds modest gains, offshore yuan rises as Jackson Hole is in view

By Laura Matthews and Samuel Indyk

NEW YORK/LONDON (Reuters) – The dollar was little changed to slightly higher against a basket of its peers on Monday, recouping some of its earlier losses as traders held on to large positions in the greenback ahead of the Federal Reserve’s Jackson Hole, Wyoming, symposium starting on Friday.

The dollar index, which measures the currency against six other majors and has had five straight weeks of gains, last rose 0.068% to 103.440, still shy of Friday’s two-month high of 103.68.

Karl Schamotta, chief market strategist at Corpay in Toronto, said the widening in expected growth differentials is currently the big trade in global market as yields in the UK and Europe play catch-up with the United States.

“The dollar does look like it is still the cleanest dirty shirt on the global economic landscape,” Schamotta said. “Traders are holding relatively hefty positions in the dollar going into Jackson Hole just in case Chair Powell does come out with a more hawkish perspective on recent data.”

The euro was up 0.1% at $1.0889, while sterling was last trading at $1.2736, down 0.03%.

The Japanese yen, which is on intervention watch, weakened 0.65% versus the greenback at 146.35 per dollar.

Although the yen has fallen to levels around which authorities stepped in last year, analysts at JP Morgan sees the threshold for currency market intervention at around 150 per dollar this time around.

Also on watch for intervention is the Chinese yuan, which rose 0.2% in offshore markets versus the greenback at $7.29 per dollar.

The currency fell to the weaker side of 7.3 per dollar earlier before rebounding after Reuters reported that state-owned Chinese banks were seen actively mopping up offshore yuan liquidity, a move that raised the cost of shorting the currency.

China earlier cut its one-year benchmark lending rate by 10 basis points (bps) and left its five-year rate unchanged, against economists’ expectations for larger 15-bps cuts to both.

In the United States, Fed Chair Jerome Powell is set to speak on Friday, and his comments may set the direction for U.S. Treasury yields, which have driven the rise in the dollar in recent weeks.

Ten-year yields soared to a 15-year high on Monday and were last up 8.7 basis points at 4.337%. [US/]

The theme this year for the annual gathering in Wyoming is “structural shifts in the global economy”.

“While China’s stimulus was underwhelming, hopes remain high for more action should the economy continue to slow,” said Joe Manimbo, senior market analyst at Convera in Washington.

“Key for the buck and broader markets this week will be whether the Fed chair should underscore how inflation remains too high. Having rallied for weeks now, the dollar may show some fatigue, particularly since U.S. borrowing rates are likely at or near peak levels.”

In cryptocurrencies, bitcoin last fell 0.8% to $25,985 while Ethereum last rose 0.3% to $1,661.60

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Currency bid prices at 11:46AM (1546 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

103.4400 103.3900 +0.07% -0.048% +103.5000 +103.1300

Euro/Dollar

$1.0884 $1.0873 +0.11% +1.58% +$1.0914 +$1.0871

Dollar/Yen

146.3500 145.4100 +0.66% +11.64% +146.3950 +145.1450

Euro/Yen

159.29 158.03 +0.80% +13.54% +159.3800 +157.8000

Dollar/Swiss

0.8802 0.8828 -0.27% -4.79% +0.8827 +0.8788

Sterling/Dollar

$1.2727 $1.2736 -0.06% +5.25% +$1.2765 +$1.2711

Dollar/Canadian

1.3564 1.3551 +0.10% +0.11% +1.3567 +1.3497

Aussie/Dollar

$0.6389 $0.6405 -0.23% -6.26% +$0.6421 +$0.6389

Euro/Swiss

0.9580 0.9587 -0.07% -3.18% +0.9601 +0.9573

Euro/Sterling

0.8551 0.8539 +0.14% -3.31% +0.8562 +0.8534

NZ

Dollar/Dollar $0.5897 $0.5924 -0.42% -7.10% +$0.5936 +$0.5897

Dollar/Norway

10.6280 10.6540 -0.20% +8.35% +10.6600 +10.5530

Euro/Norway

11.5727 11.5632 +0.08% +10.28% +11.5920 +11.5110

Dollar/Sweden

10.9738 10.9756 +0.05% +5.44% +10.9981 +10.9023

Euro/Sweden

11.9452 11.9395 +0.05% +7.14% +11.9644 +11.8940

(Reporting by Laura Matthews in New York and Samuel Indyk in London; Additional reporting by Tom Westbrook in Singapore; Editing by Kirsten Donovan, Mark Potter and Jonathan Oatis)