Dollar climbs as Evergrande uncertainty swirls

© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo

By Chuck Mikolajczak

NEW YORK (Reuters) - The dollar was on track for its biggest daily percentage gain against a basket of major currencies in a week on Friday, as uncertainty over beleaguered Chinese property developer Evergrande helped the greenback bounce back from a sharp decline in the prior session.

China Evergrande Group owes $305 billion and has run short on cash, missing a Thursday deadline for paying $83.5 million and leaving investors questioning whether it will make the payment before a 30-day grace period expires. A collapse of the company could create systemic risks to China's financial system.

The safe-haven dollar had its biggest one-day percentage drop in about a month on Thursday after Beijing injected new cash into the financial system and Evergrande announced it would make interest payments on an onshore bond.

The decline came a day after the greenback was lifted by Wednesday's announcement from the U.S. Federal Reserve that it will likely begin to trim its monthly bond purchases as soon as November and flagged interest rate increases may follow suit sooner than expected as the central bank moves away from its pandemic crisis policies.

"We are in one of the situations, and this doesn’t always happen, where the dollar is the beneficiary of multiple ideas," said Joseph Trevisani, senior analyst at FXStreet.com.

"The U.S. economy does look better than most of it competitors, there is lingering fear out there over Evergrande and what else is out there in the rather untransparent Chinese economy and political system, plus the Fed appears finally ready."

The dollar index rose 0.291%, with the euro down 0.25% to $1.1707.

Kansas City Fed President Esther George said the U.S. labor market has already met the central bank's test to pare its monthly bond purchases, and the discussion should now turn to how its massive bondholding could complicate the decision on when to hike rates.

In prepared remarks in a listening session with a wide swath of economic players, Fed Chair Jerome Powell did not elaborate on his own economic or monetary policy outlook, which he had outlined at the close of the two-day Fed meeting on Wednesday.

Sterling weakened a day after hawkish comments from the Bank of England on Thursday pushed the pound to its biggest one-day percentage gain since August 23.

The Japanese yen weakened 0.38% versus the greenback at 110.73 per dollar, while Sterling was last trading at $1.3675, down 0.30% on the day.

Cryptocurrencies slumped after China's most powerful regulators increased the country's crackdown on the digital assets, with a blanket ban on all crypto transactions and crypto mining.

Bitcoin, the world's largest cryptocurrency, last fell 6.12% to $42,154.72.

Smaller coins, which generally move in tandem with bitcoin, also dropped. Ether last fell 8.43% to $2,888.00 while XRP last fell 7.2639757% to $0.93.

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Currency bid prices at 10:19AM (1419 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

93.3690 93.1040 +0.29% 3.765% +93.4210 +93.0430

Euro/Dollar

$1.1707 $1.1738 -0.26% -4.18% +$1.1747 +$1.1701

Dollar/Yen

110.7300 110.3300 +0.36% +7.17% +110.7300 +110.2000

Euro/Yen

129.64 129.49 +0.12% +2.14% +129.7600 +129.3900

Dollar/Swiss

0.9255 0.9247 +0.12% +4.65% +0.9260 +0.9225

Sterling/Dollar

$1.3675 $1.3723 -0.34% +0.10% +$1.3736 +$1.3660

Dollar/Canadian

1.2696 1.2658 +0.31% -0.29% +1.2730 +1.2644

Aussie/Dollar

$0.7246 $0.7297 -0.69% -5.80% +$0.7316 +$0.7237

Euro/Swiss

1.0835 1.0850 -0.14% +0.26% +1.0864 +1.0822

Euro/Sterling

0.8558 0.8553 +0.06% -4.24% +0.8572 +0.8550

NZ

Dollar/Dollar $0.7007 $0.7070 -0.86% -2.40% +$0.7080 +$0.7006

Dollar/Norway

8.6150 8.5835 +0.25% +0.21% +8.6280 +8.5790

Euro/Norway

10.0868 10.0694 +0.17% -3.63% +10.1029 +10.0610

Dollar/Sweden

8.6598 8.6171 +0.12% +5.65% +8.6654 +8.6218

Euro/Sweden

10.1395 10.1277 +0.12% +0.63% +10.1447 +10.1218