Dollar Falls Back From China-Fueled High, Sets New Low Vs Yen

  • Commodity FX defensive amid prospect for slower China growth
  • Canadian dollar weakens after economy unexpectedly contracts

The dollar retreated from its best levels of the session in mid-morning trading though still held gains against half of its G-10 peers after rising modestly following a report that China’s president Xi Jinping is open to China’s growth dropping below the government’s 6.5 percent target.

The Australian dollar led losses in commodity currencies on the China news while Treasuries rose on the prospect that global growth may face an additional and unexpected headwind. There was very little additional trading volume on the move, a trader in London said.

Currency flows have been modest and trading ranges remain snug with staffing on many European and U.K. trading desks already thinned or non-existent ahead of the Christmas holiday and with next-to-no appetite for risk ahead of what is mostly a long weekend in major trading centers.

The dollar retreated despite data that showed November new homes sold at a 592,000 annual rate compared with an estimate of 575,000 and as the University of Michigan final consumer sentiment rose to 98.2 versus expectations for a reading of 98.0.

  • EUR/USD is trading at 1.0449 vs 1.0427 low in the session seen after the China report; the euro is cushioned by bids ahead of 1.0400, a trader in Asia said
  • Offers are in place ahead of 1.0500 where supply capped the pair on Thursday after a modest round of stop-loss driven demand.
  • USD/JPY trading at 117.26, near a 117.18 session low, a laggard in the broader USD gain though may be weighed by cross flows as AUD and NZD are pressured amid prospect of slower China growth
  • USD likely to find bids under 117.20, trader said
  • AUD/USD drops to fresh session low of 0.7160, lowest since late May while NZD falls to 0.6862, its lowest since early June; CAD also trading near low with losses exacerbated by a report that showed the Canadian economy unexpectedly contracted in October
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