Dollar licks wounds as China data looms

economictimes.indiatimes.com:

dollar took respite on Monday after suffering its worst weekly drop of the year, as traders waited on economic data and policy decisions before selling it down any further. Chinese growth data and loan-rate settings are due later in the session, ahead of U.S. retail sales and British inflation later in the week and a slew of central bank meetings next week.

The euro, which jumped 2.4% last week to a 16-month high, held just below that peak at $1.1228. The yen, also up 2.4% last week, held at 138.69 per dollar. The dollar's slide began with yen buying, as investors unwound yen-funded positions in emerging markets, but extended sharply after softer-than-expected U.S.

inflation data leant support to wagers that U.S. interest rates will soon peak. Hikes are expected from the Federal Reserve and European Central Bank next week, but beyond that market pricing implies the Fed will likely stop, before cuts next year, while in Europe another hike probably beckons.

«The FX market is front running possible normalisation of Fed policy in 2024,» said Chris Weston, head of research at broker Pepperstone in Melbourne. «The question then is whether the dollar sell-off has gone too far and we are at risk of mean reversion early this week.» The U.S. dollar index dropped 2.2% last week, its sharpest one-week fall since November, and was steady at 99.956 early in the Asia session on Monday.

The Australian dollar has come back from last week's top of $0.6895 to trade at $0.6830 on Monday and likewise at $0.6364 the New Zealand dollar was below Friday's five-month peak of $0.6412. The Antipodeans could face pressure if Chinese data disappoints. Elsewhere the dollar moves have been so large that a short-term breather may be in order.