Safe-haven dollar stands up to inflation and energy jitters

U.S. dollar banknotes are displayed in this illustration taken February 14, 2022. REUTERS/Dado Ruvic

HONG KONG, July 11 (Reuters) – The dollar was at the forefront at the start of a week in which U.S. and Chinese data and European energy security were front and center as investors worried about economic growth worldwide supported the safe haven. currency.

The euro languished at $1.01475, after losing 2.3% last week and briefly falling to its lowest level since late 2002.

The greenback gained 0.37% against the yen to 136.63 in early trading, not far from a 20-year high hit last month, leaving the dollar index at 107.29.

“The (dollar) could remain expensive until risks related to high global inflation, European energy security and China’s growth outlook are resolved,” Barclays analysts said in a note to the media. clients.

“This week’s US CPI will be an important piece of the puzzle as the Fed decides between 50 basis points and 75 basis points ahead of the July meeting.”

Data is due Wednesday and markets would likely interpret a high reading as a sign that the US Federal Reserve should raise rates even more aggressively to fight inflation.

With inflation soaring across much of the world, rate hikes are also expected this week from the Reserve Bank of New Zealand on Tuesday and the Bank of Canada on Thursday.

Energy concerns meant the euro was struggling against more than the dollar and in early trading Monday was at 0.85 British pence and 138.48 yen, just above levels seen last Friday when it bottomed since the end of May against both currencies.

In the latest concern for the European economy, the largest gas pipeline carrying Russian gas to Germany begins its annual maintenance on Monday. Flows are expected to stop for 10 days, but governments, markets and businesses fear the shutdown could be extended due to the war in Ukraine. Read more

The other major economic event this week is China’s second-quarter GDP on Friday, with investors watching for signs of the economy getting tough from COVID-19 shutdowns in many cities during the quarter.

The number of cases is rising slightly again in Shanghai, although much lower than it was, and authorities there and in several cities are scrambling to eradicate new outbreaks. Read more

Britain will release its second quarter GDP data on Wednesday, but the focus is more on the ruling Conservative Party’s choice of its next leader and prime minister, as candidates throw their hats into the ring, with many promising tax cuts. Read more

The pound was stable at $1.2028 on Monday morning, having ended a volatile period last week not far from its starting point.

Bitcoin was at $20,800 after its last attempt at a significant breakout around $20,000 failed over the weekend. It was stuck at around that level for the past month.

Reporting by Alun John; Editing by Sam Holmes

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