LONDON: The dollar drifted lower against a trade-weighted basket of its rivals on Monday, extending a three-week losing streak, though investors were wary of driving the currency lower before a couple of event risks this week.
On Tuesday, the U.S. Senate Banking Committee holds a hearing to confirm the nomination of Jerome Powell to succeed Janet Yellen at the helm of the Federal Reserve while the U.S. Senate resumes deliberations on the tax plan this week after the Thanksgiving break.
“There is some caution after the dollar tumbled last week with the potential for some news on the U.S. tax front and as Powell gets sworn in but markets are broadly in narrow ranges,” said Alvin Tan, an FX strategist at Societe Generale in London.
The dollar index edged lower to 92.715, near two-month low of 92.675 touched on Friday. Sterling fetched $1.3344, holding near Friday’s two-month peak of $1.3360.
With major global currencies hemmed in tight trading ranges, the South African rand was the standout performer in London trading.
The currency jumped by as much as 3 percent against the greenback as markets took some relief from Moody’s decision to only place South Africa on review for downgrade as an outright cut would have meant the country would have lost its position in some key global bond indexes.
Heavy selling of blue-chip shares dragged China’s stock markets sharply lower on Monday as rising bond yields spooked investors. But the fallout seemed to be limited to the mainland with Hong Kong’s stocks lagging the drop there and overseas bonds relatively more stable.
“The Chinese stock market drop is reminiscent of the selloff that we saw in the summer of 2015 and that is causing some investors to become cautious going into the thin year end markets,” said Viraj Patel, an FX strategist at ING in London.
The euro fetched $1.1930, little changed from late U.S. levels last week after having hit a high of $1.1946, its highest level in two months.
The euro notched its biggest weekly performance in more than two months last week as some hedge funds bought the single currency in holiday-thinned trades last week, triggering some stop losses.
The common currency now faces a test at $1.1965. That level is the 76.4 percent retracement of its decline from a 2 1/2-year peak of $1.2092 touched on Sept. 8 to a 3-1/2-month low of $1.1553 set on Nov 7. It has gained 3.2 percent from that low.—Reuters