Forex markets in caution mode as high-yielding currencies slip, dollar rises
The dollar edged towards a one-year high on Monday as trade war rhetoric between the United States and its trading partners helped the U.S. currency.
Chinese stocks slumped nearly 2 percent as Beijing proposing tariffs on $60 billion worth of U.S. goods on Friday, while a senior Chinese diplomat cast doubt on prospects of talks with Washington to resolve the conflict.
The dollar index, which measures it against a basket of six other currencies, was about 0.3 percent higher at 95.425, a 2-1/2 week high and headed towards a more-than-one-year peak of 95.652 reached on July 19.
With Friday's U.S. jobs data broadly indicative of a strong economy and July inflation data due later this week, markets are primed for a further increase in U.S. Treasury yields, which should support the dollar.
Efforts by the Chinese central bank to curb currency weakness have proved ineffective. Both the onshore and offshore yuan were slightly weaker against the dollar.
China's central bank said it would set a reserve requirement ratio of 20 percent from Monday on financial institutions settling foreign exchange forward dollar sales to clients, effectively raising the cost for investors of betting against the yuan.
Britain's pound sank to an 11-month low as comments by officials about a no-deal Brexit stoked fears among currency investors that Britain could soon crash out of the European Union without securing a trade agreement.
Elsewhere, the euro held at a five-week low of $1.1543.
Bart Wakabayashi, Tokyo branch manager at State Street Bank said the negative impact on markets from the trade tariff exchanges between Washington and Beijing is not as acute as it had been previously.
"Whenever there is an imbalance in the market in terms of uncertainty, the initial flight to safety is probably to the dollar. which is the preferred currency right now," he said.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)