Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Dollar Down, Investors Digest Surprise PBOC Benchmark Cut

ForexJan 16, 2022 11:07PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters.

By Gina Lee – The dollar was down on Monday morning in Asia, with the People's Bank of China (PBOC) springing a surprise benchmark cut. Investors are also looking ahead to the U.S. Federal Reserve's January policy decision and the timetable for interest rate hikes.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.01% to 95.153 by 10:58 PM ET (3:58 AM GMT).

The USD/JPY pair was up 0.20% to 114.43 with the Bank of Japan handing down its policy decision on Tuesday.

The AUD/USD pair inched up 0.07% to 0.7211 and the NZD/USD pair inched up 0.08% to 0.6803.

The USD/CNY pair inched down 0.08% to 6.3478, with Chinese data released earlier in the day showing that the GDP grew 4% year-on-year and 1.6% quarter-on-quarter in the fourth quarter of 2021. The data also showed that industrial production grew 4.3% year-on-year and retail sales grew 1.7% year-on-year in December, while the unemployment rate was at 5.1%.

The GBP/USD pair inched up 0.04% to 1.3678.

Chinese bonds rose, while the yuan fell after the PBOC cut borrowing costs for medium-term loans for the first time since April 2020. Ten-year government bond futures rose to their highest since June 2020 after the move, and the yuan began onshore trade marginally softer at 6.3555 per dollar.

Meanwhile, the dollar's move follows its jump on Friday along with U.S. yields. The hawkish interest rate provided support for the U.S. currency even as momentum for gains started to wane.

"Friday's move suggests to me that the interest rate driver for dollar strength is not dead and buried. It may not necessarily return to drive new dollar highs, but "we've had a hawkish twist out of every Fed meeting since June 2021," said National Australia Bank (OTC:NABZY) head of foreign exchange strategy Ray Attrill.

Investors are also looking ahead to the Fed’s next policy decision, due to be handed down on Jan. 26. J.P. Morgan CEO Jamie Dimon remarked that there could be "six or seven" interest rate hikes in 2022, while hedge fund manager Bill Ackman floated tweeted over the weekend that he expects an initial 50 basis point hike.

U.S. markets are closed for a holiday on Monday, but benchmark 10-year futures were sold to a two-year low, and Fed funds futures also fell.

Elsewhere a month-long rally for sterling petered out, but some investors believe it could resume gains should inflation data prompt the Bank of England (BOE) to hike interest rates.

"Interest rate markets are currently pricing an 80% plus chance of a 25 bp rate hike by the BOE on Feb. 3," said Commonwealth Bank of Australia (OTC:CMWAY) strategist Joe Capurso.

"A quicker pace of inflation could see pricing move closer to 100%."

Dollar Down, Investors Digest Surprise PBOC Benchmark Cut

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email