On Monday morning in Asia, the dollar was going down, while the euro was gasping for air. The strong data on U.S. core retail sales also made investors less sure that the U.S. Federal Reserve would raise interest rates quickly.
The US Dollar Index, which measures the value of the dollar against a basket of other currencies, was down 0.20 percent at 1:44 a.m. ET, to 107.84 (0544 GMT).
The USD/JPY fell 0.24 percent to 138.20.
The AUD/USD pair increased 0.24 percent to 0.6808, while the NZD/USD pair increased 0.09 percent to 0.6165.
The GBP/USD exchange rate rose 0.43 percent to 1.1903, while the USD/CNY exchange rate fell 0.17 percent to 6.7458.
The Nord Stream 1 pipeline is the largest one that brings natural gas from Russia to Germany. On July 11, it began its annual maintenance, which will last for 10 days.
Because of the war in Ukraine, the markets are afraid that the shutdown could last longer. Germany, which has the world’s fourth-largest economy, would be hurt by a loss of gas.
“If that doesn’t happen, it would be very bad for a lot of currencies,” Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, told Reuters. The euro is likely to lose the most, while the dollar would gain.
Investors also kept an eye on inflation in the U.S. and whether or not the tightening of money would cause a recession. The US Michigan 5-Year Inflation Expectations fell from 3.1 percent in June to 2.8 percent in July, according to data released on Friday.During their meetings on July 26 and 27, Fed officials made it clear that they would stick to a 75-bp rate hike to bring down inflation.
In the Asia-Pacific region, China reported 691 new COVID cases on Saturday, up from 547 the day before. This made markets worry even more about China’s path to economic recovery.
The Bank of China will meet on Wednesday, and the Bank of Japan will do the same on Thursday.
“The silver lining is that China doesn’t face imminent or high inflationary pressures right now,” NatWest Markets China economist Peiqian Liu told Reuters. “This means that policymakers can stick to their easing bias to help the recovery.”
“However, the hawkish Fed and China’s policy of deleveraging make it harder for the PBoC to cut rates quickly or in a row. We still expect fiscal easing to be the main policy lever in the second half of the year. “
At its policy meeting later this week, the European Central Bank is likely to raise rates by 25 basis points.
