SINGAPORE- The dollar eased on Monday but held close to a two-year peak, as traders awaited a raft of US economic data this week headlined by December’s nonfarm payrolls report for further clues on the Federal Reserve’s rate outlook.
In Canada, Prime Minister Justin Trudeau is increasingly likely to announce he intends to step down, though he has not made a final decision, a source told Reuters. The Globe and Mail earlier reported that Trudeau was expected to announce his resignation as early as Monday.
Markets appear to have largely priced that in and might welcome an election to clarify matters, leaving the US dollar down 0.36 percent against its Canadian counterpart to C$1.4395
Also in focus was the Chinese yuan, which on Friday weakened past the psychological level of 7.3 per dollar in the onshore market for the first time in 14 months, after the People’s Bank of China (PBOC) had aggressively defended that key threshold for most of December.
The onshore yuan slid a 16-month low of 7.3289 per dollar, while its offshore counterpart ticked up 0.06 percent to 7.3558.
“The PBOC looks to have stopped defending that 7.30 level,” said Ray Attrill, head of FX strategy at National Australia Bank (NAB).
“That just draws a lot more attention to what the PBOC does from a fixing perspective today and in the coming days, as to whether effectively they’re now allowing dollar/CNY to trade up into a higher trading range or not, because I do think that will have implications for broader Asia currencies, but also for the Aussie and kiwi.”
Prior to the market opening on Monday, the PBOC set the midpoint rate, around which the yuan is allowed to trade in a 2 percent band, at 7.1876 per dollar.
The Australian and New Zealand dollars, often used as liquid proxies for the yuan, were hardly affected by Friday’s move lower in the Chinese currency, as they both traded roughly 0.2 percent higher in the Asian session.
