The U.S. dollar or the greenback as many people call it held below a one-month high tested overnight as global markets stabilized on Tuesday. In the meantime, investors, bracing for a potential default by China Evergrande, sought safety in the yen and the franc.
Some investors perceived Monday’s selloff as an opportunity to engage in “buy the dip” trades.
The equity market remains near historical highs according to recent surveys. Price action on Tuesday restored some calm to currency markets. Cyclically oriented currencies such as the Australian dollar and the Norwegian krone strengthened their positions.
A weekly investor survey conducted by JP Morgan revealed interesting details. More than 60% of respondents plan to increase equity market exposure. A Bank of America’s survey last week found investor positioning in equities among its private clients was near record highs.
But defaults fears are not going anywhere. China Evergrande Group is trying to avert the worst-case scenario. The group’s chairman tried to lift confidence in the embattled property company. Unsurprisingly, financial markets looked for possible intervention by China to stem away domino effects across the global economy.
The country’s government has the ability to save China Evergrande Group. Nonetheless, it may decide not to save the world’s most indebted property developer.
Dollar and Swiss franc
The U.S. dollar fell to 93.12 against a basket of its rivals. The index declined after reaching its highest point since August 23 at 93.45 in the previous session.
The Norwegian krone benefited from a bounce in markets along with higher commodity prices. The krone rose nearly 1%, erasing most of its overnight losses.
The Australian dollar, as well as the New Zealand dollar, gained 0.1% each.
The Swiss franc rose to 1.0869 per euro, nonetheless, was still near Monday’s peak of 1.08750.
Cryptocurrencies are trying to deal with challenges. On Tuesday, Bitcoin was stable at around $43,000 after earlier touching $40,192.90 for the first time since August 6. Its rival Ether rebounded more than 3% to $3,076, after dipping to $2,803.20, also a first since August 6.