U.S Dollar Stays Solid, Posts Third Straight Weekly Gains
In its third straight week of gains, the greenback rallied against a basket of major currencies as investors sought the safe haven currency amid uncertainty over beleaguered Chinese property developer Evergrande.
Investors are unsure whether China Evergrande Group will make the payment before the 30-day grace period ends because it owes $305 billion and lacks cash. China Evergrande Group missed its deadline for paying $83.5 million on Thursday and is running short of cash. Systemic risks might be created if the company collapses.
Despite the fact that the U.S. economy appears to be stronger than most of its competitors, there is still fear about Evergrande and what else lies ahead in China’s opaque economic and political system, plus the Fed appears finally ready to tighten liquidity.
A measure of the greenback strength against a basket of currencies, called the US Dollar Index, rose 0.24% to 93.27 index points at the end of Friday trading sessions.
Unless 93.50’s horizontal area around five weeks old is crossed, recovery moves are unlikely. As well as acting as an upside checker, the yearly high close to 93.72 index points serves as a barrier.
The odds of a rally towards November peak near 94.30 cannot be ruled out if the DXY buyers cross the 93.72 resistance.
Accordingly, economic data coming out of the world’s largest economy will likely impact the Dollar over the remainder of the month, with a batch of positive developments expected to put pressure on the central bank to change gears at its next interest rate decision on November 3.
Esther George, President of the Kansas City Fed, earlier disclosed that the U.S. labour market has already passed the central bank’s test to pare its monthly bond purchases; on the other hand, the central bank’s massive bond holdings may complicate rate hike decisions.
Loretta Mester, Cleveland Fed president, also echoed her bias that rate increases may take place by the end of next year should the job market progress as expected.