By Peter Nurse
Investing.com – The dollar pushed higher in early European trade Monday, rallying to a month-high on the back of safety flows given concerns about the health of Chinese property giant Evergrande and ahead of this week’s crucial Federal Reserve meeting.
At 2:35 AM ET (0735 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher at 93.328, having earlier climbed to 93.356, its highest since Aug. 23.
fell 0.1% to 109.83, dropped 0.1% to 1.1715, falling to its lowest since late August, fell 0.3% 1.3706. The risk sensitive fell 0.4% to 0.7237, a three-week low, hit by the slump in iron ore prices, one of Australia’s key exports.
Worries about the financial health of have hit equities, prompting risk-off sentiment within the foreign exchange market, to the benefit of the safe-haven dollar.
Evergrande is China’s second-largest property developer by sales, and has managed to rack up some $300 billion in debts. Doubts are growing over whether it will be able to make a bond interest payment of $83.5 million due on Thursday. A messy default could have wider implications on the Chinese economy at a time when growth is already looking fragile.
However, the main focus remains on the , with the U.S. central bank set to hold a two-day policy meeting this week, ending on Wednesday.
The Fed is widely expected to stick with broad plans for tapering this year but will hold off providing details or a timeline at this meeting.
That said, Friday’s U.S. consumer sentiment release showed improving confidence, while were surprisingly strong in August, implying an improving economy.
“The August job report pulled the rug from under most analysts/market participants betting on a firm September taper announcement,” said analysts at Nordea, in a note. “We are not certain that the Fed will dare to present a firm tapering plan on Wednesday, but we remain firm that they will have to take further steps toward becoming concrete on how and when [this week].”
The Fed isn’t the only central bank meeting this week, with the likes of the , the and the also scheduled to get together. But the main news could come from Scandinavia, with Norway’s Norges Bank expected to become the first central bank in western Europe to lift rates.
Elsewhere, rose 0.3% to 1.2810, with the oil-sensitive Canadian dollar hit by Monday’s fall in oil prices as well as political uncertainty ahead of an election where polling suggests incumbent Prime Minister Justin Trudeau will remain leader of a minority government.
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