BUSINESS

Dollar holds firm as growth fears stalk markets

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SINGAPORE — The dollar kept

trade-sensitive currencies pinned near multi-year lows on Monday

and the euro was under pressure as investors sought safety due

to worries about slowing global growth.

Data on Friday showed euro zone inflation surging to another

record, adding to the case for the European Central Bank to hike

interest rates this month.

While the common currency was steady at $1.0435 on

Monday, it is barely above May’s five-year trough of $1.0349 and

highlights the market’s preference for dollars as gloom clouds

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the outlook.

The Australian and New Zealand dollars hit two-year lows on

Friday and weren’t far from those levels early in the Asia

session, with the Aussie down 0.3% to $0.6796, after

falling to as low as $0.6764 on Friday. The kiwi slipped 0.1% to

$0.6197.

Trade is likely to be lightened ahead of the Independence

Day holiday in the United States.

Safety flows tend to support the greenback, especially at

the expense of trade and export-driven currencies, when the

world economy is weak. This has kept the dollar elevated even as

growth fears have tempered U.S. rate hike expectations.

The U.S. dollar index stood at 105.100, not far below

last month’s two-decade high of 105.790. The Atlanta Federal

Reserve’s much-watched GDP Now forecast has slid to an

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annualized -2.1% for the second quarter, implying the country

was already in a technical recession.

“The Aussie and other commodity currencies and even euro and

sterling will likely decline even more into the week, given

markets currently are super-focused on the risk of a sharp

slowdown in the global economy,” said Carol Kong, a currency

strategist at the Commonwealth Bank of Australia in Sydney.

Sterling hit a two-week low of $1.1976 on Friday

and last bought $1.2095.

Ahead this week, Australia’ central bank meets on Tuesday

and investors are also awaiting the publication of minutes from

last month’s Federal Reserve meeting on Wednesday, and U.S.

employment data on Friday.

Markets have priced in a 40 basis point (bp) hike in

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Australia, so the Aussie may not catch much of a boost if that

is delivered.

Minutes of the Fed’s June policy meeting on Wednesday are

almost certain to sound hawkish given the committee chose to

hike rates by a super-sized 75 bps.

The market is pricing in around an 85% chance of

another hike of 75 basis points this month and rates at

3.25-3.5% by year end – before cuts in 2023.

Against Asian currencies the dollar held Friday gains that

lifted it to its strongest levels in years on the Thai baht

, Indonesian rupiah and Singapore dollar

.

The Chinese yuan began the onshore session steady

at 6.7021 per dollar.

========================================================

Currency bid prices at 0135 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

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Previous Change

Session

Euro/Dollar $1.0433 $1.0427 +0.04% -8.24% +1.0444 +1.0418

Dollar/Yen 134.8100 135.2700 -0.34% +0.00% +135.2950 +134.8150

Euro/Yen

Dollar/Swiss 0.9584 0.9596 -0.05% +5.15% +0.9596 +0.9583

Sterling/Dollar 1.2093 1.2095 +0.00% -10.57% +1.2119 +1.2095

Dollar/Canadian 1.2900 1.2883 +0.16% +2.05% +1.2902 +1.2876

Aussie/Dollar 0.6796 0.6817 -0.31% -6.51% +0.6828 +0.6796

NZ 0.6197 0.6205 -0.13% -9.46% +0.6217 +0.6197

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Rae Wee; Writing and additional reporting by Tom

Westbrook; Editing by Sonali Desai)

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