The dollar held mostly steady against the euro and the yen on Thursday, but dropped against the Australian dollar after domestic job data beat expectations, and against the yuan, which received a lift from Chinese monetary authorities.
The dollar is heading for its first weekly gain in nearly a month against a basket of currencies, having made most upward headway against the pound. The pound has lost 2.3% in value this week after data on Wednesday showed UK inflation finally appeared to be cooling.
Meanwhile, the Chinese yuan rose after monetary authorities in Beijing relaxed a rule that allows companies to raise funds overseas, while China’s major state-owned banks were believed to have sold dollars on the offshore market.
The dollar index traded roughly unchanged against a basket of currencies but stayed within sight of this week’s 15-month low, although individual currency reactions to data are likely to be volatile for now, according to Societe Generale (OTC:SCGLY) Fx strategist Kit Juckes.
“It’s partly because we’re at that point in the cycle where we are debating who is going to pause and who is going to go and how close we are (to the peak) and so each piece of new information has an exaggerated impact on expectations for the global rate cycle in each individual country,” Juckes said.
China left lending benchmarks unchanged on Thursday, and the central bank added it had raised a cross-border financing ratio that dictates the maximum any company can borrow as a proportion of its next assets, allowing domestic firms to tap overseas markets for funds.
Encouraging more capital inflows could take some of the recent downward pressure on the yuan.
The dollar was last down 0.65% on the day against the offshore yuan, which strengthened to 7.186 per dollar.
The hike indicated the People’s Bank of China‘s policy guidance to “defend the (yuan) and curb the excessive forex volatility alongside the strong CNY fixing bias”, said Ken Cheung, chief Asian FX strategist at Mizuho Bank.
