TOKYO- The dollar remained on the front foot in Asia on Wednesday, holding on to overnight gains against major peers as investors sought the safety of the currency amid risks from a floundering Chinese economy and downgrades for US banks.
The risk-sensitive Australian and New Zealand dollars wallowed near multi-month lows. The Chinese yuan, however, got some respite after the central bank set a stronger official rate than expected, signaling its discomfort with recent declines.
The US dollar index – which measures the currency against the euro, yen and four other counterparts – was little changed at 102.50 in the Asian morning, following a 0.47 percent rise in the previous session.
Worries about the global economy flared again after data on Tuesday showed Chinese imports and exports contracting faster than expected in July.
Data on Wednesday showed China’s consumer prices fell for the first time in more than two years in July, fanning deflation fears, although the decline of 0.3 percent was slightly less than forecast in a Reuters poll.
Concerns about US banks added to the risk-averse sentiment, after Moody’s cut credit ratings of several small to mid-sized US banks and said it may downgrade some of the nation’s biggest lenders, including Bank of New York Mellon and US Bancorp. Rome also caused a commotion by setting a one-off 40 percent tax on Italian bank profits.
US Treasuries also saw a surge in demand from haven-seeking investors, with 10-year yields briefly dipping back below 4 percent .
“In a different set of circumstances, I would have looked at the 10-year yield below 4 percent and said the dollar should be lower, but it just speaks to the risk-off environment we’re in,” said Ray Attrill, head of foreign-exchange strategy at National Australia Bank. – Reuters
