Dollar edges higher as China COVID worries spur defensive buying

SINGAPORE  – The U.S. dollar started the week on the front foot, boosted by defensive buying as investors remained on edge following a spike in COVID-19 cases in some cities in China that prompted officials to tighten restrictions.

China’s capital Beijing reported two COVID-19 deaths for Nov. 20, with the city’s most populous district urging residents to stay at home on Monday, extending a request from the weekend.

The rising cases have cast doubt on the hopes of an early easing in strict pandemic restrictions.

“The outlook for China’s zero-Covid market will remain a key source of volatility,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

“If we do see another set of step up in restrictions, it indicates to me that the Chinese officials are still wary of any eventual reopening.”

The dollar index rose 0.131 percent to 107.030 on Monday, after logging its biggest weekly gain in a month last week, while the offshore Chinese yuan rate was at $7.1700 per dollar.

Hawkish comments from the Federal Reserve officials have helped the safe-haven dollar stabilise after its sharp dive earlier in November.

Investors will be keenly interested in the minutes from the Fed’s November meeting due to be released on Wednesday that could shed light on how high officials ultimately expect to raise interest rates.

Meanwhile, cryptocurrencies remained under pressure, with bitcoin down 0.3 percent to $16,205.00, while Ether also shed 0.3 percent. FTX owes its 50 biggest creditors nearly $3.1 billion, according to bankruptcy filings, as the collapsed crypto exchange undertakes a strategic review of its global assets.

The euro fell 0.21 percent to $1.0302, while sterling was last traded at $1.1851, down 0.30 percent on the day.

The Japanese yen weakened 0.04 percent versus the greenback at 140.42 per dollar. The Australian dollar fell 0.25 percent versus the greenback at $0.665, while the kiwi was down 0.21 percent at $0.614.