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The dollar fell on Monday as investors bet again that the Federal Reserve (US central bank) will cut interest rates soon, and the yuan fell to its lowest level in a month after China’s central bank surprised markets by stabilizing interest rates in the medium term.
The People’s Bank of China fixed interest rates when extending maturing medium-term loans, contradicting market expectations that it would reduce them to support China’s faltering economic recovery after the Corona virus pandemic.
This led to the yuan falling in trading inside China to its lowest level in a month at 7.1813 against the dollar. It also declined in foreign trading to 7.1906 against the dollar, approaching its lowest level in a month which it recorded on Friday.
The British pound fell 0.1 percent to $1.2730, but remained close to the highest level in two weeks, which it reached last week.
The euro hovered near the $1.10 threshold and rose 0.13 percent in the latest trading to $1.0964. The dollar index fell 0.1 percent to 102.30 points after fluctuating greatly in the past two sessions.
Bets increased that the Federal Reserve would start cutting interest rates next March after data on Friday showed the producer price index unexpectedly fell in the United States in December, leading to a decline in Treasury yields.
According to the CME Group’s FeedWatch tool, market participants now expect 78 percent that the US central bank will start cutting interest rates in March, compared to 68 percent a week ago.
The yen remained under pressure at 145.15 against the dollar amid expectations that the Bank of Japan will likely maintain an easy monetary policy at next week’s monetary policy meeting.
The Australian dollar rose 0.13 percent to $0.6695. The New Zealand dollar fell 0.11 percent to $0.6234.
The Taiwanese dollar fell to its lowest level in more than three weeks at 31.222 to the dollar after Lai Cheng-ti of the Democratic Progressive Party won the presidential elections at the weekend, although his party lost its majority in Parliament.
