Dollar rebounds as China COVID worries spook markets

NEW YORK, Nov 21 (Reuters) – The US

China’s capital warned on Monday that it was facing its most severe test of the COVID-19 pandemic, closing businesses and schools in hard-hit districts and tightening rules on entering the city as infections ticked higher in Beijing and nationally.

The new cases cast doubt on hopes that the government could soon ease the heavy restrictions. This strengthened the dollar, which is considered a safe haven in times of stress.

The dollar rose 0.9% against the Japanese yen to 141.665 yen, on pace for its biggest one-day gain since Oct. 14. The euro fell 0.74% against the greenback to $1.0248.

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“All eyes are on China today and their Covid zero policy. Traders are worried that China may expand their restrictions which could slow down growth and threaten higher inflation,” said John Doyle, vice president of trading and trading at Monex USA.

“The concern is seen across asset classes,” Doyle said.

China’s onshore yuan opened at 7.1451 per dollar and weakened to a low of 7.1708, the softest level since Nov. 11.

With investors taking a dim view of risky currencies, the Australian dollar, as a liquid proxy for risk appetite, sank 0.8% to a more than 1-week low of $0.6617.

Analysts have chalked up some of the dollar’s strength to a rebound after the sharp selloff in recent weeks, which saw the dollar index slip as much as 4.7% in November.

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“I look at the dollar’s rally this morning as a reflection of recent weakness, rather than a sign that something is changing,” said Keith Jukes, chief FX strategist at Societe Generale.

Cooler-than-expected US That has prompted traders to take profits on existing long dollar positions.

Speculators’ bets on the US it. Dollar swung to a net short for the first time in more than a year, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. Read more

The dollar index remains up to 12% for the year.

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Investors will be parsing minutes from the Fed’s November meeting, due to be released on Wednesday, for any hints about the outlook for interest rates.

On Monday, the stronger dollar weighed on sterling with the British currency slipping 0.6% to $1.18125 against a strengthening US dollar.

Elsewhere, cryptocurrencies remained under pressure, with bitcoin down about 1% to $16,130 as the crypto industry continues to reel from the high profile collapse of crypto exchange FTX. FTX owes its 50 biggest creditors nearly $3.1 billion, according to bankruptcy filings.

Reporting by Saqib Iqbal Ahmed, editing by William Maclean

Our standards: The Thomson Reuters Trust Principles.

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