In its third straight week of gains, the greenback rallied against a basket of major currencies as investors sought the safe haven currency amid uncertainty over beleaguered Chinese real estate developer Evergrande.
Investors are unsure whether China Evergrande Group will make the payment before the 30-day grace period ends, as it owes $ 305 billion and is running out of cash. China Evergrande Group missed its deadline to pay $ 83.5 million on Thursday and is strapped for cash. Systemic risks could be created if the business collapses.
Despite the fact that the US economy appears to be stronger than most of its competitors, fears persist about Evergrande and what lies ahead in China’s opaque economic and political system, and the Fed finally seems ready. to tighten liquidity.
A measure of the greenback’s strength against a basket of currencies, called the US dollar index, rose 0.24% to 93.27 index points at the end of Friday’s trading sessions.
Unless the approximately five week old 93.50 horizontal zone is crossed, recovery moves are unlikely. In addition to acting as an upside controller, the annual high near 93.72 index points serves as a barrier.
The chances of a rally to the November peak near 94.30 cannot be ruled out if DXY buyers break through the resistance at 93.72.
As a result, economic data from the world’s largest economy is likely to have an impact on the dollar over the remainder of the month, with a series of positive developments expected to put pressure on the central bank to change gears during the month. of its next interest rate decision on November 3.
Kansas City Fed Chairman Esther George earlier revealed that the US labor market has already passed the central bank’s test to reduce its monthly bond purchases; on the other hand, massive holdings of central bank bonds can complicate rate hike decisions.
Loretta Mester, chairman of the Cleveland Fed, also echoed her bias that rate hikes could take place by the end of next year if the labor market progresses as expected.
This article originally appeared on FX Empire