(BFM Bourse) – While the market is regaining its appetite for risk, the dollar, the safe haven par excellence, is falling against the euro but also against the yen.
The dollar continued its decline on Friday, reaching a three-month low against the euro, as the year-on-year inflation slowdown in the United States, and the easing of China’s anti-Covid policy undermined the attractiveness of the safe investment.
Around 3:20 p.m. in Paris, the greenback fell heavily by 0.99% to 1.0311 dollars per euro after falling to 1.0324 dollars per euro, a level not seen since mid-August.
The dollar also lost ground against the Japanese currency, at 139.40 yen (-1.13%), falling back below the 140 yen threshold for the first time since the beginning of September.
Inflation lower than expected
The Dollar index, which compares the greenback to a basket of other major currencies, had already experienced its worst session in seven years the day before, and lost 3.2% on Friday since Thursday morning.
Consumer prices in the United States rose 7.7% in October compared to October 2021, according to the benchmark CPI index published on Thursday, a less sharp increase than the 8.2% increase recorded in September and below economists’ expectations.
“An earlier and lower peak in US inflation reduces the risks of a hard landing for the economy in 2023,” said Societe Generale analyst Kit Juckes.
Lower-than-expected inflation is pushing investors to expect less marked rate hikes from the US Federal Reserve (Fed).
“With the hope of a (very) gradual easing of health restrictions in China and an energy crisis in Europe which is receding”, as well as the situation in Ukraine which is showing some signs of improvement, ” risk appetite has returned to the market,” he said.
Easing of restrictions in China
In a note, the Chinese government has in particular strictly prohibited preventive or overly long confinements, school closures not approved by the authorities.
The note also calls for “accelerating” anti-Covid vaccinations in China, in particular those of the elderly, who are very reluctant at the moment, as well as for strengthening the stocks of antiviral treatments against Covid.
“Yesterday’s market movement was among the most remarkable since the start of the pandemic due to indicators (of inflation note) which differ from forecasts by 0.2 points”, is surprised however Jim Reid, analyst at Deutsche Bank , who recalls that such a gap between forecasts and figures “was seen last July”.
Up 0.58% against the greenback at 1.1784 dollars, the British pound on the other hand yielded 0.41% to 87.50 pence for one euro.
Britain’s GDP contracted by 0.2% in the third quarter, the Office for National Statistics (ONS) said on Friday.
“The long-term trend has been clear for some time,” notes James Richard Sproule, analyst at Handelsbanken, who recalls that the British budget “to be announced on November 17 will be crucial in determining the depth and duration of the recession”.
(With AFP)
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