Dollar pulls back as risk appetite improves; Australian and New Zealand currencies will rise

The New Zealand dollar rose 0.65% to $0.63115 and the Aussie rose 0.25% to $0.67485. Both currencies are often used as liquid substitutes for the Chinese yuan.

China will no longer need to quarantine incoming travelers from January 8, despite an increase in Covid cases, the National Health Commission said on Monday. At the same time, Beijing has downgraded its Covid case management regulations from category A to the less strict category B.

Christopher Wong, currency strategist at OCBC, said, “Despite the surge in Covid cases on the mainland, there is no end to the pace of easing Covid restrictions. “This shows that Chinese policymakers are committed to pursuing a full reopening.

“Additionally, there are reports that China may take extraordinary measures to support growth,” Wong said.

Elsewhere, the British pound was up 0.16% at $1.20865 and the euro was up 0.06% at $1.06395.

The US dollar index was steady at 104.12 against a basket of currencies.

Data released Friday showed U.S. consumer spending barely rose in November while inflation eased further, bolstering expectations that the Federal Reserve will ease its aggressive monetary tightening.

“December was a soft month for the greenback, in line with the seasonal trend,” said Francesco Pesol, FX strategist at ING.

“It’s good to remember that the dollar has appreciated in January for the past four years. Our outlook for early 2023 is still one of dollar recovery.”

The Japanese yen rose 0.1% to 132.75 per dollar as the recently vulnerable currency continued to be boosted by Japan’s (BOJ) surprise yield curve adjustment last week.

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BOJ Governor Haruhiko Kuroda on Monday ruled out the possibility of an immediate abandonment of ultra-liberal monetary policy, signaling that markets and policymakers will be paying more attention after Kuroda’s term ends in April next year.

“While (the) policy change has made the outlook for the BOJ more uncertain, we continue to believe that BOJ policymakers will not make any further policy changes until the end of 2023,” Wells Fargo analysts said.

“Inflationary pressures are expected to ease, leaving the BOJ with less impetus for policy action.”

In cryptocurrencies, crypto lender Vault has called off its potential acquisition by rival Nexo, according to a report by CoinDesk.

Bitcoin last fell to $16,914, while Ether fell 0.1% to $1,227.

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