LONDON, Jan 29 (Agencies): The dollar edged higher against a basket of currencies on Monday, helped by rising bond yields and a week packed with U.S. data starting with a central bank policy decision, though the broader outlook remained murky for the greenback.
Conflicting signals from top U.S. officials last week did little to discourage bearish positions, with net short dollar bets increasing to their highest level since October, according to latest positioning data. The dollar is set to post its biggest monthly decline since March 2016.
"The dollar is getting some help from higher U.S. yields and we have the Fed and the jobs data this week, but the broader story remains selling the greenback into any rallies," said Alvin Tan, a currency strategist at Societe Generale in London. Against a basket of currencies, the dollar bounced a quarter of a percent higher to 89.30 after scoring six consecutive weeks of losses.
On a monthly basis it is set to fall three per cent. Over the last decade, including the global financial crisis in 2008, it has fallen only 10 times by that extent, according to Thomson Reuters data.
Treasury Secretary Steven Mnuchin gave U.S. currency bears a major boost last week with a tacit endorsement of a weak dollar. While Trump tried to row back from those comments, the damage had already been done and the dollar's downturn since November showed little sign of abating.
The greenback is also losing its relative yield attraction for investors. Short-term interest rates are expected to rise in other countries as the European Central Bank and many others start to scale back their easy monetary policy.
The central parity rate of the Chinese currency renminbi, or the yuan, strengthened 169 basis points to 6.3267 against the U.S. dollar Monday, the seventh consecutive rise, according to the China Foreign Exchange Trade System.
Huang Zhilong, a researcher with the financial research arm of the Suning Group, attributed yuan's strong reading to persistent weakening of the U.S. dollar.
The dollar index, a gauge that measures the U.S. currency's strength against six other major currencies, have declined over three per cent since the beginning of this year.
The yuan has also gained nearly 3.0 per cent against the U.S. dollar since earlier this year, tracking the dollar weakness by the same margin. A strong yuan is also backed up by solid fundamentals of the Chinese economy and improvements of the company profits, he said.
