Dollar Down Ahead of Fed Officials’ Speeches

The dollar was down on Monday morning in Asia, with U.S. Federal Reserve officials scheduled to speak later in the week and a decision due on the inclusion of Chinese government bonds in the FTSE Russell World Government Bond Index (RWGBI).

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.16% to 92.870 by 9:55 PM ET (2:55 AM GMT).

The USD/CNY pair inched down 0.06% to 6.7633, with the yuan rising more than 1% in September thanks to foreigners buying Chinese bonds. The bonds’ entry into the RWGBI is expected to boost inflows and support the yuan.

FTSE Russell will announce its decision on Thursday, and “people are trying to get in ahead of that,” Commonwealth Bank of Australia (OTC:CMWAY) currency analyst Joe Capurso told Reuters.

Ahead of the decision, the ICBC CSOP FTSE Chinese Government Bond Index ETF started trading on the Singapore Stock Exchange earlier in the day. Widely touted as the world’s largest China government bond ETF, it has already raised up to $676 million in seed funding,

The USD/JPY pair edged down 0.15% to 104.40, with moves light due to a public holiday in Japan. Investors have turned to the safe-haven asset over recent uncertainty, such as November’s U.S. presidential elections and the ever-increasing number of global COVID-19 cases, with the yen not far from a seven-week high on Friday. Lower U.S. real yields also gave the yen a boost.

“The yen is an attractive currency, I see no reason to sell it,” Pepperstone head of research Chris Weston told Reuters. He also noted that real yields in Japan are positive, which “makes the yen very attractive, especially against the pound and dollar, where real rates are not just negative but in the case of the Fed, they are actively seeking lower rates out.”

Fed Chairman Jerome Powell is due to speak before Congressional committees later this week, while Fed committee members Charles Evans, Raphael Bostic, Lael Brainard, James Bullard, Mary Daly and John Williams (NYSE:WMB) are also scheduled to deliver speeches later in the week.

Should they clarify on how the Fed will implement looser monetary policy settings in the wake of its relaxed approach to inflation, it could give the yen an even further boost.

The GBP/USD pair was up 0.26% to 1.2949, although continued uncertainty over Brexit and a spike in COVID-19 cases in Europe capped gains.

The U.K. is contemplating implementing a new national lockdown, with other European countries such as Denmark and Greece announcing new restrictions during the previous week.

The AUD/USD pair edged up 0.18% to 0.7302, and the NZD/USD pair edged up 0.15% to 0.6769. The Reserve Bank of New Zealand is scheduled to meet on Wednesday.

Although the central bank is widely expected to make no policy changes, its hints at negative rates and adjustments to its large-scale asset purchase (LSAP) bond-buying program could see volatility in the New Zealand dollar.

“We don’t expect any change on policy, but the tone will be dovish and they may signal an intention to flex the pace of the LSAP more to help flatten the curve, which would take pressure off the NZD,” ANZ analysts said in a note.