Riskier Currencies Soared on Monday. What Caused the Rally?  

Dollar Up, but Below One-Year High

On Friday morning, the dollar rose in Asia. The safe-haven dollar, though, held below a one-year high as risk sentiment rose. The riskier Australian dollar traded near a three-week high reached the previous session, gaining 0.55 percent against the U.S. dollar.

The U.S. Dollar Index Futures, which measures the U.S. currency against a basket of foreign currencies, increased 0.01 percent to 94.233. The USD/JPY exchange rate rose 0.25 percent to 111.87. Data from Japan released earlier revealed that household consumption declined by a greater-than-expected 3% year on year and 3.9 percent month on month in August.

The AUD/USD pair rose 0.06 percent to 0.7316, while the NZD/USD pair rose 0.34 percent to 0.6945.

The USD/CNY exchange rate rose 0.08 percent to 6.4502. The Caixin services purchasing managers index in China for September, announced earlier in the day, was 53.4.

The GBP/USD pair fell 0.01 percent to 1.3615.


U.S. Jobs Data


Investors are also looking forward to the following U.S. jobs data, including non-farm payrolls, and are expected later in the day. The statistics could impact the Federal Reserve of the United States’ timetable for asset tapering. The Fed has stated it should begin as soon as November 2021. The Fed may also raise interest rates in 2022.

Across the pond, newly appointed Bank of England Chief Economist Huw Pill stated that inflationary pressures were proving more challenging to manage than previously assumed. His remarks supported expectations for an interest rate hike in February 2022 and possibly as early as 2021. The United States Senate decided to temporarily raise the debt ceiling on Thursday, preventing a catastrophic debt default. Global energy price declines have also helped to alleviate stagflationary concerns.

The recovery in risk appetite supports pro-growth currencies, with safe-haven pairs underperforming,” said Rodrigo Catril, FX analyst at National Australia Bank (OTC: NABZY).

According to the report, the Australian dollar has made “a decent attempt at breaking higher.” However, the real test will be whether it can maintain around $0.7315 after multiple failed tries in 2021.

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