Dollar Retreats from 10-Week Highs as Risk Appetite Recovers Amid Bond Yield Surge and China Concerns
The U.S. dollar has eased from its recent 10-week highs as global risk appetite rebounded following a jump in U.S. government bond yields and concerns about the weakening Chinese economy. The dollar’s recent strength had been supported by rising U.S. Treasury yields, with the benchmark 10-year yields reaching 16-year highs. However, a pause in the dollar’s rally is observed as investors adopt a cautiously optimistic stance.
The U.S. dollar index, which measures the dollar against six major currencies, showed a slight decline at 103.30, remaining below its recent 10-week high of 103.68. Despite the retreat, the dollar has gained around 1.4% in August so far.
The dollar weakened against the yen, falling as much as 0.5% during London trade and ending the day down 0.3% at 145.76 yen. This followed a meeting between Bank of Japan Governor Kazuo Ueda and the prime minister, where exchange-rate volatility was reportedly not discussed.
Investors anticipate Federal Reserve Chair Jerome Powell’s speech at the central bank symposium in Jackson Hole, Wyoming, as it is expected to provide insights into the outlook for interest rates. The dollar’s trajectory may be influenced by Powell’s comments on whether rates will remain higher for an extended period.
Although the dollar trimmed early losses against European currencies, indicating underlying strength, it showed a slight decline against the euro (0.1% weaker at $1.0885) and a modest gain against the pound (touch firmer at $1.2760).
China’s yuan, which has faced pressures due to economic concerns, experienced slight fluctuations. The yuan briefly rose to a one-week high before weakening again. The People’s Bank of China set the yuan midpoint at 7.1992 per dollar, attempting to stabilize the currency following recent declines. However, ongoing economic challenges and investor confidence issues continue to impact the yuan’s performance.
The Australian dollar exhibited a 0.4% increase at $0.6441, benefiting from the recovery in global risk appetite after reaching a 9-1/2-month low of $0.6365 previously.
While the dollar’s recent strength was driven by rising bond yields and concerns about China, its retreat highlights the delicate balance between various economic factors influencing the currency’s movements in a complex global environment.