FOREX-Dollar holds firm as growth fears stalk markets

BY Reuters | ECONOMIC | 07/03/22 10:24 PM EDT
       By Tom Westbrook and Rae Wee
    SINGAPORE, July 4 (Reuters) - The dollar kept
trade-sensitive currencies pinned near multi-year lows on Monday
and the euro was under pressure as investors sought safety due
to worries about slowing global growth.
    Data on Friday showed euro zone inflation surging to another
record, adding to the case for the European Central Bank to hike
interest rates this month.
    While the common currency was steady at $1.0435 on
Monday, it is barely above May's five-year trough of $1.0349 and
highlights the market's preference for dollars as gloom clouds
the outlook.
    The Australian and New Zealand dollars hit two-year lows on
Friday and weren't far from those levels early in the Asia
session, with the Aussie down 0.3% to $0.6796, after
falling to as low as $0.6764 on Friday. The kiwi slipped 0.1% to
$0.6197.
    Trade is likely to be lightened ahead of the Independence
Day holiday in the United States.
    Safety flows tend to support the greenback, especially at
the expense of trade and export-driven currencies, when the
world economy is weak. This has kept the dollar elevated even as
growth fears have tempered U.S. rate hike expectations.
    The U.S. dollar index stood at 105.100, not far below
last month's two-decade high of 105.790. The Atlanta Federal
Reserve's much-watched GDP Now forecast has slid to an
annualised -2.1% for the second quarter, implying the country
was already in a technical recession.
    "The Aussie and other commodity currencies and even euro and
sterling will likely decline even more into the week, given
markets currently are super-focused on the risk of a sharp
slowdown in the global economy," said Carol Kong, a currency
strategist at the Commonwealth Bank of Australia in Sydney.
    Sterling hit a two-week low of $1.1976 on Friday
and last bought $1.2095.
    Ahead this week, Australia' central bank meets on Tuesday
and investors are also awaiting the publication of minutes from
last month's Federal Reserve meeting on Wednesday, and U.S.
employment data on Friday.
    Markets have priced in a 40 basis point (bp) hike in
Australia, so the Aussie may not catch much of a boost if that
is delivered.
    Minutes of the Fed's June policy meeting on Wednesday are
almost certain to sound hawkish given the committee chose to
hike rates by a super-sized 75 bps.
    The market is pricing in around an 85% chance of
another hike of 75 basis points this month and rates at
3.25-3.5% by year end - before cuts in 2023.
    Against Asian currencies the dollar held Friday gains that
lifted it to its strongest levels in years on the Thai baht
, Indonesian rupiah and Singapore dollar
.
    The Chinese yuan began the onshore session steady
at 6.7021 per dollar.

========================================================
    Currency bid prices at 0135 GMT
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change
                                              Session
 Euro/Dollar                  $1.0433        $1.0427     +0.04%         -8.24%      +1.0444     +1.0418
 Dollar/Yen                   134.8100       135.2700    -0.34%         +0.00%      +135.2950   +134.8150
 Euro/Yen         Dollar/Swiss                 0.9584         0.9596      -0.05%         +5.15%      +0.9596     +0.9583
 Sterling/Dollar              1.2093         1.2095      +0.00%         -10.57%     +1.2119     +1.2095
 Dollar/Canadian              1.2900         1.2883      +0.16%         +2.05%      +1.2902     +1.2876
 Aussie/Dollar                0.6796         0.6817      -0.31%         -6.51%      +0.6828     +0.6796
 NZ                           0.6197         0.6205      -0.13%         -9.46%      +0.6217     +0.6197
 Dollar/Dollar


All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ


 (Reporting by Rae Wee; Writing and additional reporting by Tom
Westbrook; Editing by Sonali Desai)

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Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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