SINGAPORE (Reuters) – The dollar fell on Monday but remained near to a two-year high as traders anticipated a slew of US economic data this week, led by December’s nonfarm payrolls report, for more hints on the Federal Reserve’s interest rate stance.
Prime Minister Justin Trudeau of Canada is increasingly likely to announce his resignation, though he has yet to make a final decision, according to a source. According to the Globe and Mail, Trudeau is set to announce his resignation on Monday.
Markets appear to have factored this in and may welcome an election to clarify issues, with the US dollar down 0.36% against its Canadian equivalent to C$1.4395.
The Chinese yuan was also in focus, as it fell beyond the psychological level of 7.3 per dollar in the onshore market for the first time in 14 months, despite the People’s Bank of China (PBOC) vigorously defending that critical benchmark throughout the majority of December.
The onshore yuan fell to a 16-month low of 7.3289 per dollar, while the offshore equivalent rose 0.06% to 7.3558.
“The PBOC appears to have stopped defending that 7.30 level,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank (NAB).
“That just draws a lot more attention to what the PBOC does from a fixing perspective today and in the coming days, as to whether effectively they’re now allowing dollar/CNY to trade up into a higher trading range or not, because I do think that will have implications for broader Asia currencies, but also for the Aussie and kiwi.”
Prior to Monday’s market opening, the PBOC fixed the midpoint rate, which allows the yuan to trade in a 2% zone, at 7.1876 per dollar.
The Australian and New Zealand currencies, which are frequently considered as liquid proxies for the yuan, were mostly unaffected by Friday’s drop in the Chinese currency, trading approximately 0.2% higher in the Asian session.
