NEW YORK: The safe-haven Swiss franc and Japanese yen gained on Monday, while the Aussie dollar and Chinese yuan underperformed as protests against COVID restrictions in China knocked market sentiment.
The US dollar dipped, meanwhile, which analysts said was unusual as it ran counter to its typical role as a safe haven.
Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China’s stringent COVID restrictions flared for a third day and spread to several cities in the wake of a deadly fire in the country’s far west.
“We’re really looking at the government response to what’s happening... the government response is so unpredictable, and of course that just means de-risking,” said Chris Weston, head of research at Pepperstone.
The greenback dipped 0.46% to 138.51 Japanese yen, and fell 0.41% against the Swiss franc to 0.9440. The Euro gained 0.29% to $1.0433.
Shaun Osborne, chief FX strategist at Scotiabank in Toronto, said that the move in the dollar could reflect a shift in market sentiment towards the US currency, but noted that its too soon to be certain.
“It does suggest perhaps that the swing against the dollar in the sense of the broader market mood or market positioning is perhaps running a little bit deeper this morning and that might well be significant,” Osborne said.
The dollar index has fallen to 105.85 from a 20-year high of 114.78 on Sept. 28 on expectations that its rally may have been overstretched and as the Federal Reserve looks to slow its pace of rate increases.
The risk sensitive Aussie dollar was the worst performing major currency, falling 0.93% to $0.6692. The currency was also dented by data showing that Australian retail sales suffered their first fall of 2022 in October as rising prices and higher interest rates finally seemed to have an impact on spending.
The offshore yuan weakened against the dollar to 7.2273.
Fed policy will remain a key focus for the market this week with Fed Chair Jerome Powell due to speak on Wednesday, and with key jobs data for November due on Friday.
The US central bank is expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14.
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