Dollar mighty, gold at five-year lowThe dollar maintained its ascendancy, while gold extended losses at a five-year low as investors switched their focus back to the timeline for higher U.S. borrowing costs. Asian stocks retreated with Japan out for a holiday.
The greenback was steady at $1.0831 per euro by 9:52 a.m. in Tokyo, after climbing the most since May versus the common currency last week. The Bloomberg Dollar Spot Index rose 0.1 percent in a fourth rising day. The MSCI Asia Pacific excluding Japan Index slipped 0.1 percent, while Standard & Poor’s 500 Index futures were little changed. Gold dropped a sixth day. Wheat led a slide in crops on a favorable U.S. weather outlook.
The dollar is coming off its best week in two months after Federal Reserve Chair Janet Yellen reaffirmed the outlook for rate hikes this year in the U.S. and as concern over Greece and China’s stock rout receded. Commodity currencies are near multi year lows, with New Zealand projected to join Canada in cutting borrowing costs this week amid sliding commodity prices. Banks in Greece reopen Monday following their three-week shutdown.
“Investors have to be more discerning on how they play these markets,” Matthew Sherwood, head of investment markets research in Sydney at Perpetual, which manages about $21 billion. “Valuations are looking stretched. They need to find markets with compelling value, good earnings upside and continued policy support.”
The dollar strengthened against Asian emerging-market currencies, gaining at least 0.2 percent versus the Korean won and the Malaysian ringgit. The Bloomberg dollar gauge, which tracks the greenback against 10 major peers, jumped 1.6 percent last week as Greece accepted a bailout deal and mainland Chinese equities capped a second week of gains.
The New Zealand dollar was little changed at 65.18 U.S. cents after sinking 3 percent last week, its worst sell-off since January. The nation’s central bank is expected to cut interest rates Thursday for the second time this year amid sliding milk prices and below-target inflation. The Canadian dollar was steady at 1.2988 Canadian dollars, close to its weakest level since March 2009 after last week’s cut, the second in 2015.
Australia’s dollar was also near its lowest level since 2009, with banks split on whether policy makers will make further cuts to a benchmark rate already at a record low. The Bloomberg Commodity Index slipped 1.8 percent last week to its lowest level since March as metals to crude declined.
Gold for immediate delivery slipped 0.1 percent to $1,132.57 an ounce, after earlier touching its lowest price since April 2010.
China said at the end of last week that it boosted bullion assets to about 1,658 metric tons, less than brokers at GoldCore Ltd. and Sharps Pixley Ltd. had expected. Signs the economic rebound in the U.S. is on a strong footing is also taming demand for the precious metal as a haven investment.
In the equity market, Korea’s Kospi index swung between gains and losses with Australia’s S&P/ASX 200 Index, while the NZX 50 Index in Wellington added 0.1 percent.
Futures on the FTSE China A50 Index, a gauge of the biggest mainland Chinese stocks, added 0.5 percent in most recent Singapore trading, while contracts on the Shanghai Shenzhen CSI 300 Index gained 7 percent. Futures on the Hang Seng China Enterprises Index, which tracks Hong Kong-listed mainland shares, rose 0.1 percent after a 0.9 percent climb in the index on Friday all but erased its fifth straight weekly drop.
The Shanghai Composite Index advanced 3.5 percent Friday, leaving it up 2.1 percent in a second week of gains amid speculation the government is increasing funds to support the volatile market. China Securities Finance Corp., a state-backed agency that provides margin finance and liquidity, has 2.5 trillion yuan ($402.6 billion) to 3 trillion yuan on tap to support stocks, people familiar with the matter said.
China has gone to significant lengths to arrest an equity sell-off that turned the Shanghai Composite into the worst-performing index globally the past month, from one of the best earlier in the year. The cost of U.S.-traded options protecting against declines in the biggest exchange-traded fund tracking Chinese shares has surged as much as 75 percent the past three weeks, with the ETF down 5.5 percent in July.
Signs of a resolution to Greece’s crisis sent the euro down 3 percent last week. German Chancellor Angela Merkel held out the prospect of limited debt relief at the weekend, saying she was prepared to discuss the matter once Greece successfully completes the first round of its new bailout.
Capital controls and limits will remain in place as banks resume business in the beleaguered nation Monday. The daily cash withdrawal limit of 60 euros ($65) will be replaced by a weekly limit of 420 euros, while transfers abroad from Greek accounts remain banned. The Athens Stock Exchange will also stay closed, a spokeswoman said Sunday in a text message.