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* The dollar returns to its one-month low; no reaction of the euro to the PMI
* Aussie and British pound in focus ahead of central bank meetings
* Yuan stabilized at 3.5 month low, cbank commits to “cautious and flexible” policy
* Chart: Global exchange rates https://tmsnrt.rs/2RBWI5E
By Sujata Rao
LONDON, Aug. 2 (Reuters) – The dollar fell on Monday, returning to one-month lows reached last week when it became clear the Fed was in no rush to tighten policy and policymakers widely shared President Jerome Powell’s view that rate hikes were “a long way off.”
US CFTC data shows speculators reverted to the dollar in the week to July 27, with net buys on the dollar at $ 3.56 billion, the largest since last March. However, that was before the outcome of the Federal Reserve meeting where the message was unequivocally conciliatory.
Yields on US Treasury bonds fell after the meeting and real yields – corrected for inflation – hit record highs. The Fed’s conciliatory statement after the meeting was echoed by Fed Governor Lael Brainard, who said on Friday that “jobs still had a way to go.”
The dollar index fell 0.14% to 91.98 at 08:30 GMT, just after Friday’s one-month low of 91.775. The index fell 0.88% last week, its worst since early May.
Earlier in July, it hit a 3.5 month high at 93.194 as traders positioned themselves for an early start to decline.
Societe Generale strategist Kenneth Broux expects the dollar to trade in a range all the way to the Fed’s Jackson Hole summit, where many believe it will signal when to start cutting measures. relaunch.
“The dollar has had a very good week and we are up 4% from lows so consolidation is in order,” said Broux.
Markets are awaiting the July nonfarm wage report, due Friday, the last jobs report before Jackson Hole. A Reuters poll predicted an increase of 926,000, the largest in 11 months.
Broux said, however, that while there could be “some noise around the wage bill, in August it is about (thin) cash and the message China will send.”
He was referring to Beijing’s recent crackdowns in various sectors, which caused Chinese stock exits and spillovers around the world. It also helped push the yuan to its lowest level in three months against the dollar.
While markets have since stabilized and the yuan rallied to around 6.46, China’s central bank over the weekend pledged to maintain a cautious, flexible and targeted monetary policy, a sign of a new easing to come.
Data showed that Chinese factory activity growth slowed in July.
The euro showed little reaction to a July Manufacturing Purchasing Managers’ Index (PMI) reading of 62.8, a touch above the “flash” number of 62.6. The data follows data from last week showing inflation exceeding the European Central Bank’s 2% target.
The euro strengthened 0.16% to $ 1.1885 after hitting $ 1.1909 last week.
NatWest analysts said the “exit strategies”, stimulus measures as well as lockdowns, would drag currencies in the short term.
“While highly vaccinated Europe should do well on one of these fronts, an eternally accommodating ECB still leaves us to view the euro as a good funding currency,” they said.
With that in mind, investors will be watching this week’s meetings at the Bank of England and the Reserve Bank of Australia.
As the British pound is supported by the possibility of an early end of the BOE’s stimulus measures, the Australian dollar could be hit if the RBA reverses its previous decision to cut stimulus measures amid protracted lockdowns from COVID -19 hinders growth.
The Aussie edged up to $ 0.7356.
“I see no point in continuing the Aussie higher in the short term if China suppresses commodity prices and there is no acceleration of (Australia’s) vaccine progress,” added Broux.
(Reporting by Sujata Rao Additional reporting by Kevin Buckland in Tokyo Editing by Peter Graff)
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