Dollar Holds Steady As China Covid Worries Persist

On Tuesday, the US dollar lost some of its big overnight gains as investors flocked to the safe-haven currency on anxieties over China’s Covid flare ups. However, cautious risk sentiment kept the demand for the greenback high, so the dollar continued to be in demand.

The most recent wave of risk aversion has had a particularly negative impact on the currencies of the antipodes, which are frequently employed as liquid proxies for the Chinese yuan. Overnight, the Australian dollar has lost about 1 percent of its value. The price ended the day up 0.12%, at $0.6614. The New Zealand dollar dropped by more than 0.8% and was last trading at $0.6109, which was 0.15% higher than before.

The nation’s capital issued a warning on Monday that it was about to be put through its toughest test yet of the Covid-19 pandemic, as an increase in reported instances of Covid had prompted the implementation of new restrictions. In addition, deaths attributed to the virus were reported for the first time in Beijing since the end of May.

In early Asian trade on Tuesday, the offshore yuan traded at 7.1665 per dollar, which was 0.1% higher than its previous close. This comes after the currency dropped by more than 0.7% overnight.

“The safe haven appeal of the U.S. dollar is coming back into vogue as the concerns around China and the outbreaks from Covid are keeping markets nervous,” said Rodrigo Catril, a currency strategist at National Australia Bank. “The safe haven appeal of the U.S. dollar is coming back into vogue as the concerns around China and the outbreaks from Covid are keeping markets nervous” (NAB).

Overnight, the value of one dollar in Japanese yen fell more than one percent toward the weaker side of 142, and it last traded at 142.01.

“The curiosity is how Japan has also showed a great deal of sensitivity…if anything, the takeaway there is that Japan’s safe haven appeal is no longer there,” said NAB’s Catril, referring to the yen. “The conclusion there is that Japan’s safe haven appeal is no longer there,” said Catril. “It’s more like a cork in the ocean, vulnerable to risk aversion as well as swings in 10-year Treasury yields,” is how one analyst described the situation.

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Overnight, yields on most maturities of U.S. Treasury debt inched up as investors continued to re-price their expectations for how high the Federal Reserve will boost interest rates as it works to drive inflation down from levels that are close to their highest point in almost four decades.

Overnight, there was a very slight increase in the yield on the benchmark 10-year Treasury note, and it ended the day at 3.825%.

The euro was trading up 0.09% at $1.0250, recovering some of its overnight loss of 0.8%, while sterling rose 0.24% to trade at $1.1843, after plunging more than 0.5% overnight.

The index for the United States dollar was last seen trading down 0.06%, at 107.71. Overnight, it had increased by close to 0.8%, making it the day’s highest gain since November 3rd.

The speeches given by Fed speakers over night brought few shocks, and the president of the Cleveland Fed, Loretta Mester, stated that the central bank can downshift to smaller interest rate raise increments beginning the following month.

Mary Daly, president of the San Francisco Federal Reserve, stated that the impact of interest rate hikes in the actual world is likely to be more than what the short-term rate objective implies.

Economists from ING released a note in which they stated that “Fed statements stayed in line with the recent slant of rhetoric.”

Following the failure of the cryptocurrency exchange FTX, the crypto community’s attention has shifted to the cryptocurrency lender Genesis as the most recent victim to be brought to light.

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Genesis stated on Monday that it does not intend to file for bankruptcy in the near future. However, Bloomberg News reported, citing sources, that Genesis was struggling to raise fresh cash for its lending unit, and that it was warning investors that it may need to file for bankruptcy if it is unable to find funding. Genesis has stated that it does not intend to file for bankruptcy in the near future.

The most recent price for bitcoin was up 0.6% to $15,856, while the price of ether fell 0.05% to $1105.10.