US dol­lar dumped be­cause of main­land econ­omy jit­ters

Rus­sian ru­ble col­lapses; down to 7-month low on weak oil prices

The China Post - - BUSINESS INDEX & -

Cur­rency traders dumped the U.S. dol­lar Mon­day on the back of a global eq­ui­ties rout, as fears about main­land China and the global econ­omy ham­mered sen­ti­ment and sent in­vestors flee­ing into safer in­vest­ments.

The green­back dropped to 121.19 yen from 122.06 in New York on Fri­day and sharply down from above 124 yen on Thurs­day in Asia.

The euro rose to US$1.1451 from US$1.1386, while it weak­ened to 138.77 yen from 138.97 yen in U.S. trade.

Jit­ters over China and the global econ­omy saw traders move into the yen — a safe haven in times of tur­moil and un­cer­tainty — as stocks mar­kets around the world plunge.

On Mon­day, Shang­hai shares tum­bled more than 8 per­cent in the morn­ing, while Tokyo’s bench­mark stock in­dex dropped 3.21 per­cent by the break.

In­vestor fears have spiked on con­cerns the world’s sec­ond­biggest econ­omy is slow­ing more than pre­vi­ously thought af­ter main­land China’s cen­tral bank de­val­ued the yuan in a shock move seen as a bid to boost sag­ging ex­ports.

On Fri­day, main­land China re­ported weak man­u­fac­tur­ing data, fu­el­ing con­cerns among in­vestors over the cloud­ing out­look for the world econ­omy.

“China fixes, Shang­hai and U.S. stock mar­ket per­for­mances and the ac­tions — or lack thereof — of Chi­nese pol­i­cy­mak­ers, prom­ise to keep mar­kets rapt,” Na­tional Aus­tralia Bank in a com­men­tary.

The U.S. dol­lar was also hit as hopes dive for an im­mi­nent U.S. in­ter­est rate hike.

“The yen and euro are ben­e­fit­ing from both emerg­ing-mar­ket risk aver­sion caused by China’s sur­prise move this month on the yuan and from fall­ing ex­pec­ta­tions that the Fed will hike in­ter­est rates,” Man­soor Mohi-ud­din, se­nior mar­kets strate­gist in Asia at Royal Bank of Scot­land, told Bloomberg News.

Min­utes from the U.S. Fed­eral Re­serve’s July meet­ing last week re­vealed pol­i­cy­mak­ers want to see fur­ther im­prove­ment in the la­bor mar­ket and in­fla­tion be­fore rais­ing in­ter­est rates for the first time in nearly nine years.

In­vestors eye re­vised U.S. eco­nomic growth data which will be re­leased this week as a fresh sign for the tim­ing for an in­ter­est rate hike.

The Rus­sian ru­ble plunged 2.3 per­cent on Mon­day to hit a seven- month low amid a fur­ther drop in oil prices, the coun­try’s key ex­port.

The ru­ble traded at 70.7 to the U.S. dol­lar in early trad­ing in Moscow, its low­est level since Jan. 30, when Rus­sian mar­kets were hit by a com­bi­na­tion of low energy prices and Western sanc­tions.

Oil is the back­bone of the Rus­sian econ­omy and the fall of the ru­ble fol­lows a sharp de­cline in the price of crude. The U.S. oil con­tract on Fri­day dropped be­low US$40 per bar­rel for the first time since 2009 and on Mon­day was down another US$1.23 a bar­rel at US$39.22.

Rus­sian of­fi­cials have in­sisted that the econ­omy is strong enough to weather the de­cline.

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