By Gina Lee
Investing.com – The dollar was down on Monday morning in Asia, with riskier currencies such as the Australian dollar making recoveries against the U.S. currency in the wake of the previous week’s selloff in global bond markets.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.04% to 90.843 by 12:05 AM ET (5:05 AM GMT).
The USD/JPY pair inched down 0.08% to 106.50.
The AUD/USD pair gained 0.53% to 0.7745. The Reserve Bank of Australia will hand down its interest rate on Tuesday. Across the Tasman Sea, the NZD/USD pair rose 0.59% to 0.7269.
The USD/CNY pair edged down 0.14% to 6.4638. Data released earlier in the day said that China’s manufacturing purchasing managers’ index (PMI) was 50.6 in February, below the 51.1 in forecasts prepared by Investing.com and down from January’s 51.3 figure. The non-manufacturing PMI was 51.4, also down from January’s 52.4. The Caixin manufacturing PMI was 50.9, against the 51.5 in forecasts prepared by Investing.com and January’s 51.5 figure. The Caixin services PMI will be released later in the week.
Investors are looking to the country’s annual National People’s Congress meeting, where the leadership will unveil major economic goals, scheduled for Mar. 5.
The GBP/USD pair was up 0.28% to 1.3971.
The dollar broadly weakened as Asian trade began on Monday, barely enough to trim its biggest surge since June 2020 from Friday. Currency markets took cues from the global bond market, where yields soared over raised hopes of a global economic recovery from COVID-19 triggered a selloff during the past week.
The aggressive selloff implies a bet that central banks globally will need to reign in ultra-easy monetary policies earlier than they are forecasting. The debt rout also led to selloffs in equities and commodities as investors became unsettled.
“U.S. dollar direction is likely to hinge on not only the direction, but also the pace, of global bond moves,” Commonwealth Bank of Australia (OTC:CMWAY) analysts said note.
Bond moves are overriding economic data as the driver of foreign-exchange markets, with yields moving “well in advance” of economic fundamentals. “The risk is tilted to a firmer dollar this week because we doubt central banks will intervene in any meaningful way yet,” the note added.
U.S. Federal Reserve Chairman Jerome Powell reiterated that the central bank would look through any near-term inflation spike and tighten policy only when the economy is clearly improving in two testimonies before Congress during the past week. He will discuss the economy at a Wall Street Journal event on Thursday, a day after the release of the Fed’s Beige Book.