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FOREX-Yen Hits Four-Year Low Against Dollar As Risk Appetite Improves

By on October 20, 2021 0

* The yen hits a four-year low against the dollar overnight

* The Aussie and the Kiwi gain against the dollar

* Chart: global exchange rates tmsnrt.rs/2RBWI5E

LONDON, Oct. 20 (Reuters) – The dollar stabilized at the start of European trading on Wednesday, after improving global risk appetite saw riskier currencies gain and the yen hit a low four years against the dollar overnight.

European stock indexes were mostly up and the 10-year US Treasury yield hit a five-month high overnight, helped by growing optimism about the global economy and corporate earnings.

Reduced demand for safe-haven assets saw the dollar reach a four-year high of 114.695 against the yen overnight. But at 07:53 GMT, the pair was stable at 114.375.

The dollar index has held steady at 93.820, having fallen since it hit a one-year high at 94.563 last week amid expectations that the US Federal Reserve would tighten policy faster than expected. Traders have included a reduction in the Fed’s stimulus measures as early as next month, followed by a rate hike next year.

Since then, Fed tightening expectations have eased somewhat. Two-year Treasury yields fell sharply overnight, signaling a reduction in bets on Fed rate hikes.

ING FX strategists said in a client note that the recent dollar decline could be due to a combination of markets closing long dollar positions and “a benign risk environment, where a strong earnings season in states United continued to offset concerns about inflation and monetary tightening.

“At this point, it looks like the dollar is lacking in catalysts to contain the ongoing correction, and any support for the greenback may need to come from a cooling in the recent risky mood in the markets,” ING said.

The Australian dollar, seen as a liquid indicator of risk appetite, rose 0.2% on the day to $ 0.74875, after hitting its overnight high since July.

The New Zealand dollar also rose 0.2% to $ 0.7169, hitting its highest level since June overnight and gaining 1.4% so far this week.

The euro was hit that day, at $ 1.1625.

The Canadian dollar was up about 0.1% to $ 1.235, ahead of Canadian inflation data expected later in the session.

“As inflation persists above its target range and the virus is under control, the central bank is likely to start thinking about tightening its policy,” said Marshall Gittler, head of investment research at BDSwiss, in a note to clients.

“A rise in the headline inflation rate today could justify such a decision. In this regard, it is likely to prove positive for the DAC.

The pound fell 0.1% to $ 1.37775, after data showed UK inflation unexpectedly slowed last month. But the numbers have hardly changed expectations that the Bank of England will become the world’s first major central bank to raise rates.

In cryptocurrencies, the first U.S. bitcoin futures-based exchange-traded fund started trading on Tuesday, sending bitcoin to a six-month high and just off its all-time high, as traders bet that the ETF could increase cryptocurrency investment flows.

As of 08:13 GMT, bitcoin was trading at around $ 64,008, from the all-time high of $ 64,895.22 it reached in April of this year.

Reporting by Elizabeth Howcroft; Editing by Vinay Dwivedi