* Graphic: World FX rates in 2019
By Saikat Chatterjee
LONDON, Aug 19 (Reuters) - The euro advanced on Monday after
registering its biggest weekly drop in nearly two months as risk
appetite gradually returned to global markets after a week of turmoil,
though investors were still wary about the near term outlook for the
With hopes of fiscal stimulus from Germany growing and steps by
China over the weekend to cut corporate lending costs pushing up
equities, growth-sensitive currencies such as the Australian dollar
also edged higher. and
But despite the gains, the perceived safe-haven currencies such as
the Japanese yen and the Swiss franc remained firmly in demand
with sight deposits at the Swiss National Bank registering another big
weekly rise, indicating more intervention from policymakers.
"Markets seem to be recovering after last week's selloff
though some of the safe haven currencies still seem to be in
demand," said Adrian Schmidt, chief FX strategist at Continuum
Economics based in London.
"But authorities can only slow the appreciation trend in some
of those currencies such as the Swiss franc rather than drawing a line
in the sand," he said.
JP Morgan expects the franc to appreciate to 1.07 francs per euro
by the end of the year compared to 1.08755 francs now.
Against the greenback , the euro rose 0.2% to $1.1114 in London
trading after falling 1% last week, its biggest weekly drop since
Investor optimism is also likely to be capped before a speech by
U.S. Federal Reserve Chairman Jerome Powell later this week at the
Jackson Hole central bank conference.
Market strategists believe his comments will be aimed at
reassuring nervous markets that the Fed will remain in an easing
stance and set the stage for more rate cuts after a quarter percentage
point rate cut in July.
"Powell's speech will set the stage for, at the minimum, a 25
basis points rate cut at the September meeting, stressing that
quantitative tightening is over and stressing that the committee's
bias is now back in accommodation mode," said Elsa Lignos,
global head of FX strategy at RBC Capital Markets.
Money markets are pricing in a cumulative 67 basis points of rate
cuts from the Fed by the end of the year.
The dollar index , which measures the greenback against six
major currencies, was broadly steady at 98.20, close to a two-week
high of 98.339 reached on Friday.
Global markets went into a tailspin last week after bond yield
curves inverted, signalling the global economy was headed towards a
recession, sending panicky investors to the relative safety of
perceived safe-haven assets such as gold and yen.
Latest weekly positioning data showed hedge funds ramped up their
holdings of the Japanese currency for a second consecutive week versus
Against the yen , the dollar was little changed at 106.57 yen,
near a one-week high of 106.98 yen.
SNB sight deposits and EURCHF
(Reporting by Saikat Chatterjee; Editing by Toby Chopra/William Maclean)
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