Safe Haven Dollar Rises on Weak China Trade Data

Investing.com – The US dollar gained positions early in the trading day on Wednesday in Europe as traders turned to this safe haven after disappointing trade data from China weighed on sentiment.

Tracking the currency against a basket of six other major currencies, the , was up 0.1% at 104.162 as of 09:05 AM ET (0905 GMT), not far off its 2.5-month highs. registered at 104.70 at the end of May.

According to data published this Wednesday, the price fell in May to record 13-month lows, mainly due to the unexpected drop in prices and the exhaustion of foreign demand for Chinese products.

The slump in exports reflects slowing economic growth in Europe and the United States, China’s main markets for locally produced goods, which has boosted demand for dollars, a safe haven in times of stress.

The dollar has also benefited from the turmoil in the cryptocurrency markets, following the Securities and Exchange Commission’s crackdown on the cryptocurrency sector.

However, the gains are limited as traders await next week’s policy meeting amid uncertainty about its next move.

According to Investing.com’s Fed Rate Tracking Barometer, money markets believe there is about a 19% chance that the US central bank will raise rates by 25 basis points next week, compared to more than 60% from a week ago, after the weak activity data from the US service sector.

That said, the decision to raise its target cash rate by 25 basis points on Tuesday, citing the persistently elevated , creates the possibility of an upside surprise.

In addition, attention is focused today on the meeting of , amid speculation that it could also resume rate hikes, after the recent data from .

“A 25 basis point rate hike by the Bank of Canada (estimated to have a 43% chance of happening) would likely have consequences for major equity markets around the world and could keep the dollar bidding ahead of the view that the Federal Reserve could be closer to raising rates than originally thought,” ING (AS:) analysts say in a note.

The pair falls 0.1% to the 0.6667 level, the Australian dollar reversing part of the 0.8% rise of the previous day, the Aussie is up 0.1% to 7.1267, while which rises 0.1% to 1.3420.

On the other hand, the pair fell 0.2% to 1.0676, after learning that it has increased slightly less than expected in April, with an increase of 0.30% compared to the previous month, compared to the increase in 0.6% expected.

He also meets next week and everything indicates that he will continue to raise interest rates, since the rate remains well above the 2.0% target set by the central bank.

The ECB has not finished raising borrowing costs, since the company is very stubborn, explains Isabel Schnabel, a member of the Executive Committee, in an interview for De Tijd.

“We still have a ways to go,” Schnabel told the newspaper. “It will depend on the data that is arriving how much more the rates will have to be raised.”

The pair fell 0.2% to the 1.2405 level after data from the mortgage lender indicated UK house prices fell on a year-on-year basis in May for the first time in 11 years.