The U.S. dollar was close to its highest level in a month on Wednesday as investors focused on two key risks. They are monitoring China Evergrande’s problems as well as the Federal Reserve’s monetary policy.
The dollar index that tracks the greenback against a basket of currencies stood at 93.226 in early Asian trade. The index was not far from Monday’s one-month high of 93.455.
The euro stood at $1.1725, having stabilized at a one-month low of $1.1700 two days ago.
The single currency fell to a seven-month low of 127.93 against the yen. The yen strengthened its position against the euro thanks to the cautious mood.
The dollar traded at 109.65 yen on Wednesday, near the low end of its trading range since mid-August. The Bank of Japan is expected to retain its policy on hold later in the day.
Dollar, China Evergrande, and the Fed
As mentioned earlier, investors are watching Evergrande’s issues. China Evergrande Group, once China’s top-selling property developer, is inching closer to a key deadline. On Thursday, it is due to pay $83.5 million in interest related to its March 2022 bond.
Investors are also monitoring Chinese markets. They would like to see how Chinese markets will react when they will reopen on Wednesday after a four-day weekend.
The yuan was on the defensive at 6.4845 per dollar in the offshore trade. It was close to a one-month low of 6.4878 set on Monday.
Topic number two is the U.S. Federal Reserve. Analysts expect that the country’s central bank will drop more hints on its future policy path, including when to start tapering its bond-buying and when to start raising interest rates.
Another important currency, the Canadian dollar stood little changed. It pared the gains made one day earlier after Prime Minister Justin Trudeau’s Liberals won a tightly-contested election. Nonetheless, Trudeau’s gamble to win a majority of seats failed and nearly mirrored the results in 2019.
The state of Bitcoin is not ideal, as it fell to a 1-½ month low of $39,573. Bitcoin dropped more than 25% from its four-month peak. The largest cryptocurrency last stood at $40,450 while Ether fell to $2,372. The price of Ether fell more than 30% from a four-month peak.
This week, the U.S. announced sanctions against a cryptocurrency exchange over its alleged role in enabling illicit payments from ransomware attacks.