|
 China's cut in the required reserve rate for banks prodded the yuan
minimally lower and drove the Australian dollar to a day's high.
But the failure of a Group of 20 meeting to generate any hope of
governments spending much more to bolster a flagging global economy
knocked back most growth-linked currency plays.
The fall in the flash reading of euro zone inflation to -0.2 percent
boosted expectations that the European Central Bank will have to
ease policy aggressively next month, driving the euro back below
$1.09 to a four-week low.
"The read is that we got precisely zilch in new help from the G20 so
it is back to plan A: buy the dollar," said the head of currency
trading at a large Asian bank in London.
"If that holds, the target for the dollar index is 98.40 and it
almost got there this morning."
Speculators will be watching the Chinese yuan closely after Monday's
action. Both offshore and onshore rates are now down almost 1
percent against the dollar since Asian markets returned from the
Lunar New Year holiday.
Officials, however, have consistently said they want to keep the
currency broadly stable and there have been numerous signals on
moves to keep control of the capital flows out of China that drove
the yuan sharply lower in December and January.
Chinese purchasing manager surveys are due on Tuesday.
Sterling, battered by "Brexit" referendum concerns last week, was
trading below $1.39 after a weekend poll showed the "Out" camp in
the lead ahead of the June 23 vote.
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The yen, traditionally investors' safe haven of choice in times of
global economic tension, was still up 0.8 percent to 113.09 yen per
dollar.
"There's a risk-off tone across the markets this morning," said
Tobias Davis, head of corporate currency sales at Western Union in
London. "The G20 has been seen as underwhelming, coupled with
headline concerns around Brexit and Chinese equities slumping to 15
month lows."
The communique from Group of 20 finance ministers and central
bankers agreed to use "all policy tools – monetary, fiscal and
structural – individually and collectively" to improve growth, but
was undercut by signs that some governments see no room to spend
more going forward.
(Editing by Mark Heinrich)
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