Hong Kong Monetary Authority steps into market again
By: SARASJOLIN & ANNEKENTAPPE
The U.S. dollar started the week on a defensive note versus major rivals, as traders appeared to perceive U.S.-led airstrikes on Syria over the weekend as an isolated event.
Elsewhere, the Hong Kong Monetary Authority intervened for a second time to support the Hong Kong dollar, while the Russian ruble was sent on a roller-coaster ride after news the U.S. is looking to slap more sanctions on Russia.
What are currencies doing?
The euro EURUSD, +0.3001% rose to $1.2386, up from $1.2331 late Friday in New York, while the pound GBPUSD, +0.5970% jumped to $1.4322 from $1.4239 on Friday. Sterling is now trading around its highest level since late January, according to FactSet data, and within striking distance of a new post-Brexit referendum high, while the euro is at a three-week high.
The dollar also declined against the yen USDJPY, -0.08% buying ¥107.26 compared with ¥107.35 on Friday.
The buck’s course against the Hong Kong dollar USDHKD, +0.0038% was little changed after the Hong Kong Monetary Authority took action as its currency slumped and struggled to stay within its permitted trading band. The HKMA bought 3.59 billion Hong Kong dollars ($457.33 million) on Monday, having already snapped up 9.664 billion of Hong Kong dollars last week to prop up the currency. One U.S. dollar last bought 7.8501 Hong Kong dollars on Monday.
The ruble USDRUB, -0.1644% initially slumped but then recovered, shaken by news the U.S. is poised to impose more sanctions on Russia. Nikki Haley, the U.S. ambassador to the United Nations, said the new sanctions will target companies tied to the Syrian regime and its use of chemical weapons. The buck bought 62.3015 rubles, down from 62.349 on Friday, but is still up almost 8% against the Russian currency over the past month. The looming new sanctions are viewed as an American effort to punish Russia for backing the Syrian regime.
The greenback showed a mixed performance against China’s currency following last Friday’s Treasury foreign exchange report, which didn’t label China a currency manipulator. One dollar last bought 6.2804 onshore yuan USDCNY, -0.0223% up 0.1% from late Friday in New York. Versus the more freely traded offshore yuanUSDCNH, -0.1020% the buck slipped 0.1% to 6.2672.
President Donald Trump on Monday, however, took aim at China and Russia and, perhaps, the Federal Reserve, in a tweet:
Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!
— Donald J. Trump (@realDonaldTrump) April 16, 2018
What is driving the market?
Traders largely shrugged off the increase in geopolitical risks in the Middle East, with analysts noting that the market viewed the U.S.-led Syrian strikes as an isolated event. Monday’s data also failed to introduce a new theme to the dollar gauge, which continued on its lower path.
Foreign exchange investors are trying to move on from the geopolitical headlines, but with few major data releases this week, there is ample room for headlines to extend their tight grip on the market.
Elsewhere, earnings season has kicked off, keeping stock market investors busy. U.S. equities including the Dow Jones Industrial Average DJIA, +0.78% and S&P 500SPX, +0.64% kicked the week off in the green.
What are strategists saying?
“It was a slow start of week’s trade in the FX market with majors making only minor moves in absence of any significant newsflow. The bombing of Syrian targets proved to be a nonevent as traders [took] it to be a one-off affair with U.S. unlikely to commit more resources to the region for the time being,” said Boris Schlossberg, managing director of FX strategy BK Asset Management, in a note.
“Rising geopolitical and/or trade uncertainty can also affect the [dollar-yen] pair, particularly pushing it lower. The opposite holds true as well,” said Marios Hadjikyriacos, investment analyst at XM, in a note.
What are the data?
March retail sales rose 0.6%, beating consensus estimates of 0.4%, while core sales excluding cars met expectations of a 0.2% increase.
The Empire State manufacturing index for April meanwhile slumped to 15.8 from 22.5 before.
Home builder confidence fell to 69 in April from 70 before.
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