Dollar starts week on back foot as China backs Aussie

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(Bloomberg) — The US dollar fell against most major currencies on Monday as trade in Asia-Pacific took off, with the Australian dollar gaining after Chinese authorities unveiled a real estate bailout package.

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Dollar weakness comes into play after a dollar gauge fell 3.5% last week, the biggest drop since the early days of the pandemic. Traders are cutting back on aggressive Federal Reserve rate hikes after US inflation slowed more than expected.

There is also uncertainty about the legislative outlook as the balance of power in Congress remains unresolved. On Monday, investors will be looking at the outcome of a meeting between US President Joe Biden and China’s Xi Jinping, as leaders from around the world gather at the Group-of-20 summit in Indonesia.

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The Aussie gained a whopping 0.3% to 67.23 cents at 7:30 am in Sydney. The yuan will also lead the way as a possible barometer of development given the 16-point bailout plan for China’s ailing real estate sector, including a temporary easing of a restriction on bank lending to developers. China has refined its Covid zero policy to help an ailing economy.

Read more: China plans property rescue as Xi surprises with policy changes

The reaction of key Fed policymakers to last week’s slower-than-expected reading of the consumer price index will be critical for the direction of the market overall, with Christopher Waller and Lael Brainard both scheduled to speak early this week.

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Treasury yields plummeted last week and equities rose after the inflation slowdown sparked investor hopes that the Fed will not have to raise rates as much as previously expected. Any setbacks by officials could lead to a reconsideration of those moves, while encouragement could cause them to expand.

In addition, there are questions about when and how lawmakers in Washington could take steps to resolve questions surrounding the impending debt ceiling, which is on track to be exceeded sometime in 2023. US Treasury Secretary Janet Yellen said it would be “great” to get it done this year — a move that involves passing legislation before the new Congress is sworn in.

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All of this is taking place against a backdrop of ongoing uncertainty in the crypto world, which could risk spilling over into other markets. Revelations about the collapse of the FTX empire of Sam Bankman-Fried, which filed for bankruptcy last week, continue to overwhelm several crypto assets and investors.

Meanwhile, Turkish assets will be in focus after a suspected bomb attack in one of Istanbul’s popular tourist districts that killed at least six people and injured 53, raising the threat of a resurgence of terrorism in one of the largest economies. of the Middle East.

–With help from Michael G. Wilson.

(Updates everywhere with market movements.)

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