The greenback and the Japanese yen gained across the board due to falling U.S. yields on Monday as a rise in global Covid variant cases together with a fall in stocks triggered broad-based risk-aversion. (Dow Jones fell by 725 points or 2.09% for its worst drop since October 2020 and ended at 33,962, benchmark 10-year U.S. yield fell from a more than 5-month low of 1.176%).
Versus the Japanese yen, dollar met renewed selling at 110.10 in New Zealand and retreated to 109.86 at Asian open. Intra-day decline accelerated in Europe and the pair tumbled to a near 2-month trough at 109.07 in New York morning on falling U.S. yields before staging a short-covering rebound to 109.57 in New York.
The single currency traded sideways inside a narrow range in Asia before tumbling to a 3-1/2 month trough at 1.1765 at New York open. However, price erased its losses and rallied to session highs at 1.1824 in New York due partly to cross-buying of euro especially vs sterling as well as broad-based rebound in usd.
The British pound met renewed selling at 1.3778 in New Zealand and retreated to 1.3748 in Asian morning. Intra-day decline accelerated in Europe on jump in Covid cases in UK and price fell to a 5-1/2 month trough at 1.3655 in New York on broad-based selloff in sterling before stabilising.
In other news, Reuters reported U.S. President Joe Biden on Monday said an increase in prices was expected to be temporary, but his administration understood that unchecked inflation over the longer term would pose a 'real challenge' to the economy and would remain vigilant. Biden said he told Federal Reserve Board Chair Jerome Powell recently that the Fed was independent and should take whatever steps it deems necessary to support a strong, durable recovery.
Data to be released on Tuesday:
Japan nationwide CPI, Germany producer prices, Swiss trade balance, exports, imports, EU current account, U.S. building permits, housing starts, rebook and New Zealand GDT price index.
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