The dollar falls: Watch for the Fed and China’s reopening

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The US dollar has weakened during the first hours of European opening on Monday, as investors reassessed the path of US rate hikes following last week’s jobs report, while risk appetite benefited from the reopening of China’s borders.

At 03:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback’s performance against six other currencies, fell 0.4 percent to 103.267, continuing Friday’s more than 1 percent decline.

Investors now also note that the U.S. central bank is toning down its aggressive monetary tightening policy, expecting a 25 basis point hike in February, up from 50 basis points in December.

This follows the release of the official monthly US jobs report last Friday, which saw a relatively benign increase in nonfarm payrolls by 223,000 jobs in December, while average hourly earnings grew 0.3%, less than expected and less than the 0.4% of the previous month.

In addition, activity in the US services sector contracted in December for the first time after more than 2 1/2 years, further evidence of the cooling economy.

Bets against the greenback rose to 30,457 contracts last week, the highest number reached since August 2021, according to data from the U.S. Commodity Futures Trading Commission on eight currency pairs compiled by Bloomberg.

This puts the US consumer price index for December on Thursday in the spotlight, as any sign that price pressures are going to continue to ease would reinforce the feeling that the Fed is nearing the end of its most aggressive tightening cycle in decades.

On the other hand, the pair USD/CNY It fell 0.9% to 6.7748 as China’s yuan hit four-month highs after the country reopened its borders to international travelers over the weekend.

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This move marks the country’s biggest shift away from its strict zero COVID policy, which has contributed to the drastic drop in its economic growth over the past three years.

The EUR/USD It rose 0.5% to 1.0692, supported by data for a 0.2% monthly rise in German industrial production in November, an improvement from the revised 0.4% drop seen the previous month.

The GBP/USD It rose 0.6% to 1.2159, after gaining 1.5% on Friday. The USD/JPY rose 0.1% to 132.25 and AUD/USD, sensitive to risk, gained 0.8% to 0.6930.

The USD/BRL It has yet to open for trading on Monday morning, but the Brazilian real will be in the spotlight as the day progresses as investors react to news that supporters of far-right former President Jair Bolsonaro stormed key government buildings over the weekend. echoing the January 6, 2021 insurrection in the United States.

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