FX Round-up: Greenback in the red, North Korean risks calm down

Digital Look Sharecast | 11 Sep, 2017 17:37 | | |


Monday saw some respite for the US dollar as it gained 0.55% to 91.859 against a basket of currencies by 1715 BST. There was also some degree of breathing room as recent North Korean missile threats died down and a classification downgrade of Hurricane Irma to a Category 1.

North Korea celebrated it's founding day on the weekend. Over recent weeks, Pyongyang has launched several missile tests in the Pacific region which sparked turmoil and concern on global markets.

The weekend celebrations however seem to have proceeded without the threat of further missile tests, as many feared. As a result, the US dollar has gained some ground across the board and safe haven currencies are on the back foot.

The dollar index hit it's lowest level in over two years on Friday as investors expressed major concern over the short-term impact of Hurricane Irma and tensions between North Korea and the US.

Brad Bechtel at Jefferies said, "We were pretty oversold going into the end of the week in the dollar and there was a lot of potential risk on the horizon," adding, "The fact that we didn't get much on that front is helping the dollar recover a little bit."

Against safe haven currency the Japanese yen, the greenback was up 1.2% to 109.15, recovering 1.45% from Friday's low of 107.41.

The Swiss franc also lost some ground with USD/CHF trading just over 1% up to 0.9540, as investors decided to favour risk assets.

In the UK, Parliament members are voting on the Repeal Bill which overturns the 1972 Act which took Britain into the European Economic Community (EEC). In doing so, it incorporates EU laws into the UK statute book.

This vote has had minimal effect on sterling moves today and on the whole price action has been subdued with cable trading 0.17% lower to 1.3171, in part also due to a lack of significant data releases.

Sterling traded higher against the euro by 0.48% to 1.1015, as market participants look towards Thursday's interest rate announcement and policy statement from the Bank of England's (BoE).

Lee Hardman at Japan's MUFG said, "We expect the BoE to reiterate this week that the market is underestimating the scale of rate hikes likely in the coming years, although they will likely stop short of signalling a rate hike is imminent this year."

The single currency traded lower against the dollar, down 0.64% to 1.1957, retreating from a near two-year high on Friday.

The euro tumbled towards the day's lows after European Central Bank board member Benoit Coeure said improved Eurozone growth could offset some of the negative effects of the single currency's strength but that a persistent exchange rate shock could drag down inflation.

"Compared with past demand shocks, policy will remain more accommodative for longer, thereby likely muting further the pass-through of any growth-driven exchange rate appreciation," he said.

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