FX UPDATE

The U.S. Dollar edged up on Monday as sentiment was impacted on news China was maintaining stringent Covid restrictions. Over the weekend, hopes of an impending reopening of the world’s second largest economy were dashed as China is retaining its so-called “dynamic-clearing” stance to Covid cases when they emerge. The Dollar registered gains against China’s offshore Yuan, rising 0.55% to 7.2141, yet both the Australian and New Zealand Dollars declined close to 1% in early trade in Asia. At the time of writing, the Aussie was down 0.7% at $0.6426, whilst the New Zealand Dollar dropped 0.6% to $0.5893. In contrast, both enjoyed a rally at the end of last week, up almost 3%, as expectations increased that China would soon bring an end to its strict Covid restrictions, boosting risk appetite. “People are kind of thinking there's going to be an eventual opening ... but it's not obvious to me that there's an imminent reopening due, and I think it's kind of premature,” according to Alvin Tan, RBC Capital Markets head of Asia FX strategy.

Elsewhere, the Pound fell 0.3% to $1.1340, Reuters news agency reports, whilst the Euro edged down 0.1% to $0.9949, eradicating some of Friday’s gains, around 2%. “Any rally in the Aussie, as well as the other currencies, will likely prove short-lived, given China is still very committed to its approach to the COVID outbreaks,” stated Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA). The U.S. Dollar index stood at 111.02 against major rivals, after losing around 2% at the end of last week. “It was, overall, a pretty mixed report,” Kong added. “Judging by market reaction, investors really focused on the lift in unemployment rate, and that might have led to market participants scaling back their expectations on the Fed funds rate.”

In Russia, the Rouble gained on Monday, moving away from its lowest level since the middle of September. Early on Monday, the Rouble was up 0.9% against the greenback at 61.53, rose 0.1% at 60.95 against the Euro, whilst it lost 0.6% against the Chinese Yuan at 8.45, the Reuters report adds.

In addition, in India, the Rupee increased against the Dollar on Monday, to stand at 82.14, compared to 82.44 in the previous session.