The US dollar fell against its peers on Friday and is set to fall for a second straight week amid news that China Evergrande Group, a heavily indebted property developer, has averted a default appetite for risky assets.
Experts at Thai โหลด Mt4 Exness believe concerns about the property developer, whose liabilities are equal to 2% of China's gross domestic product, have prompted investors to rush towards currencies that are perceived as safe havens, such as the US dollar and government debt.
Fears of economic contagion have led a number of other heavily indebted property developers to have their credit ratings downgraded.
But days before a deadline that would have brought the developer into formal default and caused a shock to global markets, the company provided funds to pay interest on the bond in US dollars.
"So while this is good news in terms of an imminent formal default avoidable at the weekend, uncertainty will remain high until there is further clarity on the position of Evergrande and other property companies in China," MUFG strategists said. daily note.
The dollar index fell 0.1 per cent to 93.61, allowing it to continue falling for a second week in a row.
But the broader market picture remains supportive for the US dollar as rising bond yields on the back of tighter inflation expectations are expected to support the dollar.
The 10-year US Treasury bond yield has held near its highest level this year at 1.7%, while the yield differential between comparable US and German debt was 177 basis points.
Moreover, growing expectations that the US Federal Reserve will co-lead monetary tightening before other major central banks also encourage investors such as UBS Wealth Management to keep the dollar as the preferred currency in their portfolio.
Elsewhere, the Australian dollar was at $0.7498, lower than Thursday's three-month high, as the Chinese currency's rise, triggered by Evergrande news, was outweighed by the Reserve Bank of Australia's action to rein in bond sales and a pause in rising energy prices.
On Friday, the RBA said it had defended its yield target for the first time in eight months, spending A$1 billion ($750 million) to curb an aggressive bond sell-off as traders bet on inflation to raise rates further.
Elsewhere, the euro was little changed at $1.1627, while the yen fluctuated within sight of its multi-year lows, with the dollar at 114.01 yen compared to 114.69 earlier in the week, a four-year low.
