The Dollar Increased in Value

The dollar rose on Monday as sentiment worsened following China’s announcement that it will maintain its severe Covid restrictions, ending the prospects of a quick reopening in the world’s second-largest economy, which had previously sparked a wide surge in risky assets.

China said over the weekend it would continue its “dynamic cleanup” approach in the event of a case of COVID-19, and nearly three years after the outbreak, there is little sign that it will abandon its zero-COVID-19 position.

In early Asia trade, the dollar rose 0.9% against the Chinese offshore yuan to 7.2317, while the risk-sensitive Australian and New Zealand dollars fell nearly 1%.

Currencies

The Australian dollar was down 0.66% at $0.6427, while the New Zealand dollar was flat.

down 0.7% to $0.5887

Both currencies enjoyed broad gains, rising more than 3% on Friday, as risk appetite grew on growing speculation that China could soon lift Covid-related restrictions.

In other news, the pound fell 0.424% to $1.13214, while the euro rose 0.423% to €1.30.

Fell 0.3% to $0.9930, following a 2,1% gain on Friday.

Any gain in the Australian dollar and other currencies is likely to be short-lived, given China’s steadfast stance on Covid outbreaks.

The dollar was up 0.263% against the Japanese yen at 147.05.

Investors were also looking at Friday’s U.S. jobs report, which revealed that employers added 261,000 more positions than expected in October and hourly wages continued to grow, indicating a still-tight labor market.

However, signs of some market relaxation, such as the unemployment rate climbing to 3.7%, added to the case that the Federal Reserve could moderate the pace of future rate hikes, limiting the dollar’s gains.

The U.S. dollar index rose to 111.09 against a basket of currencies. Four Federal Reserve members said they would still consider a minor interest rate hike on Friday at their next policy meeting.

Fed Funds futures indicate the market has a 69% chance of a 50 base rate hike at Thursday’s Fed meeting when U.S. inflation data is the next key data point.

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