By Geoffrey Smith
The dollar was mixed against its counterparts in the developed markets on Monday morning after reaching a new high of four months in the trading of night.
The greenback was also slightly weaker against the chinese yuan after the people’s Bank of China has strengthened its stimulus measures already important since the outbreak of the virus Covid-19 by reducing its rate of funding in the medium term to a new record low.
The actions reflected more markets to chinese assets, leaving the reference index to where it was before the New Year holidays, but have not done much to remove the uncertainty about the trajectory of the chinese economy as it struggles against the epidemic.
At 10: 40 am, the dollar index, which tracks the dollar against a half-dozen of the currencies of developed markets, was 99,007, thanks in large part to gains against the japanese yen in the wake of data showing that the japanese economy contracted at an annual rate of 6.3% in the fourth quarter.
This figure was much worse than the 3.7% decline expected and came after a rise of the consumption tax in the country in October.
“Annualization always exaggerates trends,” said the chief economist at UBS Wealth Management, Paul Donovan, at a briefing of the morning, noting the results point to an increase in sales tax in October and a typhoon.
At 10: 40, USD/JPY was at 109,86, up 0.1%. The dollar was also slightly stronger against the pound Sterling to 1,3038$, while EUR/USD has slightly increased compared to the low of last week to 1,0844$.
The exchanges should be relatively quiet Monday, not only because of the holidays of the day of the american president, but also because of the key surveys on the feeling of the firms later in the week. The indices of the purchasing managers ‘ “flash” of the IHS Markit are expected Friday.
The analyst of Nordea, Martin Enlund, argued in a note the weekend that the euro could be close to its lows in the short term.
“The data seem to be terrible in Germany, but perhaps we should not be too worry about it?” wrote Enlund, adding that the Ifo survey generally reliable “suggests that we are close to a peak of negativity on the German data”.
However, he acknowledged the risk that the decline of the euro leads to new us tariffs on behalf of president Donald Trump, an action that could prevent any reversal of the situation on the euro.