The United states dollar index or it is also known as DXY climbed more than 0.5% to a range of highs in the 107.50s in Monday's (November 21/21) Asian session. What is a factor that triggers it.
The cause was the increased buying interest in safe haven assets. Market sentiment worsened as investors and traders worried about the latest reports of tightening lockdowns in China.
The government there said that the action is done in order to stem the spread of COVID-19 in China. The number of COVID-19 cases in that country continues to rise.
Beijing even reported three new deaths from that pandemic at the weekend. This was for sure prompting authorities to extend calls for people to stop traveling and stay at home.
It is the First Fatality in Six Months
That is the first COVID-19 fatality in the past six months in the country's capital Panda. China could potentially drop plans to ease lockdowns that had been released a week earlier.
Some of Beijing's biggest malls are closed on weekends, while restaurants are reducing service times. Offices have also begun urging employees to work at home.
The situation casts doubt on the effectiveness of the Zero COVID policy imposed by the Chinese authorities. Meanwhile, that is raising concerns over the impact of the lockdown on the economy.
The outlook from China's Zero COVID market will still be key to volatility. That opinion was said by Carol Kong, a currency strategist at Commonwealth Bank of Australia.
Stock Market is Shaken due to the News
If people are really witnessing a series of additional steps in restrictions, it shows to everyone that Chinese officials are still wary of the reopening (of economic activity) that will eventually have to happen.
The stock market slumped due to the news. Several risk-sensitive currency pairs are subsiding, including AUD/USD, EUR/USD, and GBP/USD.
Meanwhile, the USD/JPY pair lifted slightly to the 140.80 range. The United Stated dollar was buoyed by a growing interest in safe haven buying amid market unrest.
In addition, hawkish rhetoric from top Federal Reserve officials also reiterated the Fed's interest rate expectations ahead of the release of the minutes of the FOMC meeting on Wednesday.
USD is Trying to Rebound
The US dollar is trying to continue its rebound after recovering from a 3-month low. However, this short-term bias for the time being remains negative or is still overshadowed by bearish risks.
Currently, the Dollar Index or known as DXY is moving below the MA-50 curve with the RSI indicator below its equilibrium value. This data can be seen from various releases in the Market.
Due to the lack of catalysts for economic data in yesterday’strading (21/November) volumes are expected to be limited until ahead of the release of Markit's version of the Purchasing Manager's Index (PMI) data for the Eurozone, UK and US.
The data will be released today or on Wednesday (23/November) and become the focus of the market this week. That is why; many market participants decided to wait.
Gold is Rising above $1740
Elsewhere, gold prices rose above $1740 a troy ounce ahead of the release of Federal Reserve meeting minutes. The report is expected to signal the next United states rate hike.
It alsogiven that markets are still speculating on whether the Fed's hike rate will be lowered to 50 bps or remain at 75 bps. So far, traders have only gotten signals from the statements of some Fed officials.
San Francisco Fed Chair Mary Daly warned of the risk of overtightening. Meanwhile, the Cleveland Fed Chair Loretta Mester wants to see inflation rates fall sustainably.
It is especially before finally supporting a pause in rate hikes. This kind of situation is anticipated by several investors and market participants.