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FOREX-U.S. dollar rises as sentiment turns cautious on hedge fund default concerns

Published 30/03/2021, 01:57 am
© Reuters.
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* Focus on U.S. equities after hedge fund default

* Euro on track for biggest monthly drop since July 2019

* Yen one of worst performing currencies in Q1

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E (Recasts, adds new comment, updates prices, changes byline, dateline; previous LONDON)

By Gertrude Chavez-Dreyfuss

NEW YORK, March 29 (Reuters) - The dollar gained on Monday in choppy trading, with the euro languishing below $1.18 and commodity currencies falling, as the currency drew some safe-haven bids on concerns about the potential fallout of a hedge fund's default on margin calls.

The dollar index, a measure of the greenback's value against six other major currencies, hit as high as 92.919 =USD , its strongest level since November last year. It was last marginally up at 92.825.

U.S. stocks traded lower after global banks said they faced potential losses from a hedge fund's default, identified as Archegos Capital, which analysts said was tied to big U.S. media and Chinese tech companies. today is on how U.S. equities perform, especially given the hedge fund default that came out last week," said Simon Harvey, senior FX market analyst at Monex Europe in London.

Harvey, however, said the Archegos impact remained limited for now, given that the effect was concentrated on a few companies. But some analysts said the fallout could spread further and weigh on other markets.

The euro, meanwhile, struggled on Monday as the prospect of tougher coronavirus curbs in France and Germany dimmed the short-term outlook for the European economy.

The single European currency EUR=EBS slipped 0.1% to $1.1778, not far from last week's four-and-a-half-month trough of $1.1762. On a monthly basis, it was down 2.3%, its biggest drop since July 2019.

Compounding the euro's woes have been the widening differentials between German and U.S. yields. The spread for 10-year debt widened to 200 basis points from 150 basis points at the start of the year, boosting the dollar.

"The U.S. economy is much stronger and miles ahead in the immunization game compared to Europe's and Japan's, and this ultimately translates into the Fed normalizing policy years before the ECB or the BoJ," said Marios Hadjikyriacos, a strategist at brokerage XM.

YEN SHORTS GROW

Weekly positioning data showed the broad trend of growing dollar bullishness remained in play. Hedge funds cut their overall short dollar bets to their lowest levels since June 2020 while ramping up their bearish bets on the yen. yen positions have grown in recent weeks with hedge funds building their net short bets to 33% of open interest, according to ING data.

Steadying stock markets offered some support for the yen, but falling bond yields and expectations of a global economic rebound have rekindled short bets. The yen is among the worst- performing currencies so far this quarter, down 6% against the dollar.

The dollar was last up 0.1% against the Japanese currency at 109.74 yen JPY=EBS .

Virus-driven caution also helped the dollar higher against the Australian and New Zealand dollars and sterling, and it rose against oil-linked currencies as the re-floating of the ship blocking the Suez Canal pushed crude prices down by about 1.5%.

The Aussie AUD=D3 was last down 0.1% at US$0.7636 on Monday and the New Zealand dollar NZD=D3 was slightly down at US$0.7002. Sterling GBP= slipped to $1.3790.

========================================================

Currency bid prices at 10:34AM (1434 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

92.8180

92.7830

+0.05%

3.153%

+92.9190

+92.7160 Euro/Dollar

EUR=EBS

$1.1779

$1.1794

-0.14%

-3.60%

+$1.1795

+$1.1763 Dollar/Yen

JPY=EBS

109.7200

109.6800

+0.04%

+6.19%

+109.7950 +109.3800 Euro/Yen

EURJPY=

129.24

129.33

-0.07%

+1.82%

+129.4200 +128.8500 Dollar/Swiss

CHF=EBS

0.9385

0.9393

-0.06%

+6.10%

+0.9404

+0.9373 Sterling/Dollar GBP=D3

$1.3792

$1.3799

-0.09%

+0.91%

+$1.3846

+$1.3757 Dollar/Canadian CAD=D3

1.2596

1.2571

+0.21%

-1.08%

+1.2627

+1.2578 Aussie/Dollar

AUD=D3

$0.7634

$0.7642

-0.08%

-0.73%

+$0.7655

+$0.7616 Euro/Swiss

EURCHF=

1.1055

1.1073

-0.16%

+2.29%

+1.1078

+1.1038 Euro/Sterling

EURGBP=

0.8538

0.8552

-0.16%

-4.45%

+0.8562

+0.8507 NZ

NZD=D3

$0.7002

$0.7000

+0.04%

-2.49%

+$0.7015

+$0.6973 Dollar/Dollar

Dollar/Norway

NOK=D3

8.5415

8.5945

-0.58%

-0.49%

+8.6165

+8.5435 Euro/Norway

EURNOK=

10.0600

10.1050

-0.45%

-3.89%

+10.1534

+10.0560 Dollar/Sweden

SEK=

8.6953

8.6398

+0.53%

+6.09%

+8.7014

+8.6399 Euro/Sweden

EURSEK=

10.2423

10.1880

+0.53%

+1.65%

+10.2473

+10.1890

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates

https://tmsnrt.rs/2RBWI5E Yen positions

https://tmsnrt.rs/3fkjRZ6

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

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