The dollar index, which compares the greenback to a basket of six prominent currencies, fell to 93,501 units for the first time since September 28, before climbing to 93,565, accumulating a decline of 0.35% on the day.
A week ago, the dollar index hit its highest level in a year, at 94.563, benefiting from fears of stagflationas well as bets that the Federal Reserve will start to reduce its monetary stimulus next month, followed by interest rate hikes next year.
However, now that the Fed’s adjustment is discounted, currency markets are raising their policy normalization bets elsewhere, especially in the UK, where a cumulative rise of 35 basis points is expected by the end of the year.
The yuan appreciated on the day as fears of contagion from real estate giant China Evergrande’s debt troubles eased and some of its peers paid coupons on its bonds. The monetary authorities said last week that the situation is controllable.
This, combined with the decline in the dollar, brought the onshore yuan to 6.3883 against its US pair, its highest since June 16. In offshore operations it reached 6.3785 units, its highest level since June 16 and on the way to its highest daily advance since July.
The euro improved 0.4% to $ 1,167, a level not seen since Sept. 29.
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