The US dollar fell against its competitors for the second week in a row
The US dollar fell against its rivals on Friday and is heading for a second consecutive week of decline as news that debt-laden real estate firm China Evergrande (HK:3333) has avoided defaulting on risky assets, worries about a beleaguered real estate developer whose financial liabilities stand at 2% of its China's GDP is causing investors to flock to safe haven currencies such as the US dollar and government debt.
Fears of economic contagion saw other sectors of indebted developers hit by a credit rating downgrade, but days before the deadline that would have plunged the beleaguered developer into a formal default and send shockwaves through global markets, the company had freed up funds to pay interest on Bonds in US dollars.
In a statement, MUFG strategists said: "While this is good news in terms of avoiding an imminent official default over the weekend, uncertainty is set to remain elevated until there is more clarity on the position of Evergrande and that of other property companies in China." .
The dollar index fell 0.1% to 93.61, putting it on track for the second consecutive week of decline, but the broader market narrative remained supportive of further US dollar gains, as higher bond yields on the back of firmer inflation expectations are expected to support the currency. American.
US 10-year Treasury yields held near their highest levels this year at 1.7% while yield spreads between similar US and German bonds remained at 177 basis points, moreover, rising expectations that the US Federal Reserve would be among the leaders to tighten Monetary policy before other major central banks push investors such as UBS Wealth Management to keep the dollar as the preferred currency in their portfolio.
Elsewhere, the Australian dollar was at $0.7498, from a three-month high on Thursday, as support for the China-exposed currency outweighed the Evergrande news by measures taken by the Reserve Bank of Australia to halt bond selling, as well as a pause in price hikes. energy.
On Friday, the Reserve Bank of Australia said it intervened to defend its yield target for the first time in eight months, spending A$1 billion to discourage a strong bond sell-off as traders bet on inflation to raise interest rates forward.