Dollar firm vs Aussie, euro on heightened recession worries

The safe-haven US dollar hovered near a one-week high on Tuesday while the Aussie, euro and Chinese yuan remained under pressure

Kevin BucklandReuters
Published : 16 August 2022, 02:40 AM
Updated : 16 August 2022, 02:40 AM

The safe-haven US dollar hovered near a one-week high on Tuesday while the Aussie, euro and Chinese yuan remained under pressure as weak global economic data regnited recession fears.

The dollar index =USD, which measures the greenback against six major peers, held steady at 106.51, just below the previous session's peak of 106.55, the strongest since Monday of last week.

The euro EUR=EBS, the most heavily weighted currency in the dollar index, was little changed at $1.0158 after earlier dipping to the weakest since Aug 5 at 1.0154.

Sterling GBP=D3 was 0.1% down at $1.2040, the lowest since Aug 5.

Against the yen JPY=EBS, a much sought after haven currency, the dollar eased 0.09% to 133.19.

The global safety bid was driven by a raft of weak world economic indicators. On Monday, data showed US single-family homebuilders' confidence and New York state factory activity fell in August to their lowest levels since near the start of the COVID-19 pandemic.

That followed surprisingly weak Chinese activity data spanning industrial output, retail sales and fixed-asset investment as a nascent recovery from draconian COVID-19 lockdowns faltered.

Against the offshore yuan CNH=D3, the dollar rose 0.07% to 6.8174, heading back toward Monday's high of 6.8200, a level last since in mid-May.

The Australian dollar AUD=D3 sank as low as $0.70005, threatening to drop below the psychological 70 cent mark for the first time since Wednesday.

New Zealand's kiwi NZD=D3 dipped to $0.6349, also the lowest since Wednesday.

The Reserve Bank of New Zealand is widely expected to raise rates by half a point again on Wednesday, with the focus on whether policymakers follow the Federal Reserve and Reserve Bank of Australia in shifting to a more data-driven approach.

"The weakness in the US and Chinese economies is typically a bad sign for commodity currencies," including Aussie and kiwi, Commonwealth Bank of Australia strategist Joseph Capurso wrote in a note to clients.

"The path of least resistance for NZD is lower until the Reserve Bank of New Zealand's policy meeting tomorrow."

Toufique Imrose Khalidi
Editor-in-Chief and Publisher