U.S. dollar rises as sentiment turns cautious on hedge fund default concerns
The dollar gained on Monday in choppy trading, with the euro languishing below $1.18 and commodity currencies falling, as the currency drew some safe-haven bids on concerns about the potential fallout of a hedge fund’s default on margin calls.
- The dollar index, a measure of the greenback’s value against six other major currencies, hit as high as 92.919, its strongest level since November last year. It was last marginally up at 92.825.
U.S. stocks traded lower after global banks said they faced potential losses from a hedge fund’s default, identified as Archegos Capital, which analysts said was tied to big U.S. media and Chinese tech companies.
- The euro, meanwhile, struggled on Monday as the prospect of tougher coronavirus curbs in France and Germany dimmed the short-term outlook for the European economy.
The single European currency slipped 0.1% to $1.1778, not far from last week’s four-and-a-half-month trough of $1.1762. On a monthly basis, it was down 2.3%, its biggest drop since July 2019.
- Virus-driven caution also helped the dollar higher against the Australian and New Zealand dollars and sterling, and it rose against oil-linked currencies as the re-floating of the ship blocking the Suez Canal pushed crude prices down by about 1.5%.
The Aussie was last down 0.1% at US$0.7636 on Monday and the New Zealand dollar was slightly down at US$0.7002. Sterling slipped to $1.3790.
YEN SHORTS GROW
- The dollar was last up 0.1% against the Japanese currency at 109.74 yen.
Weekly positioning data showed the broad trend of growing dollar bullishness remained in play. Hedge funds cut their overall short dollar bets to their lowest levels since June 2020 while ramping up their bearish bets on the yen.
Short yen positions have grown in recent weeks with hedge funds building their net short bets to 33% of open interest, according to ING data.
Treasury yields rise to start the holiday-shortened week
U.S. Treasury yields rose on Monday to start the holiday-shortened week, with the 10-year yield hovering above 1.7%.
The yield on the benchmark 10-year Treasury note rose to 1.71% at around 4:00 p.m. ET. The yield on the 30-year Treasury bond rose to 2.41%. Yields move inversely to prices.
Reference: CNBC
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