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Dollar tentative amid concerns over global economic outlook


The U.S. dollar stabilised at 102.74, after rising over 0.5 per cent last week, its first in almost a month

The dollar was on the back foot on Monday, though it found some safe haven support on persisting concerns that the extended monetary tightening cycles from major central banks would further hurt the global economic outlook.

Remarkable weekend events in Russia also kept investors on guard, though response in the currency market was subdued as they evaluated the effects of the aborted mutiny.

The euro pared some of its declines from past week and was 0.05 per cent higher at $1.0901 in Asia trade.

The currency had dropped to a one-week low on Friday after figures showed that euro zone business growth virtually stopped in June amid a deepening decline in manufacturing activity and a slow growth of the bloc’s dominant services sector.

Sterling increased 0.11 per cent to $1.2730, reversing some of its 0.8 per cent decline last week after an outsized 50 bps rate hike from the BoE fuelled concerns of a UK recession.

Flash Purchasing Managers’ Index (PMI) data on Friday showed UK’s economy indicated a weakening in June but inflation pressures remained high.

In the meantime, U.S. business activity hit a three-month low this month and the decline in the manufacturing sector intensified, nonetheless the overall figures suggested economic growth was marginally higher in Q2.

Again, (there was) one more set of weak PMI data coming out of Europe, commented Carol Kong, a currency strategist at Commonwealth Bank of Australia. On the contrary, PMI data in the UK and the U.S. continue to be quite solid in the face of aggressive interest rate hikes.

Against a basket of currencies, the U.S. dollar stabilised at 102.74, after rising over 0.5 per cent last week, its first in almost a month.

The Japanese yen added over 0.2 per cent to 143.39 per dollar, though was not far from a more than seven-month low of 143.87 hit on Friday.

The yen has come under renewed pressure in recent weeks amid the sharp contrast between the BOJ’s ultra-dovish position and hawkish central banks elsewhere.

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