(Corrects yuan rate and milestones)
* Yuan skids from 3-mth highs to 3-wk lows on Evergrande worries
* Dollar index at 4-week high on safety bid
* Risk/commodity FX hit
By Ritvik Carvalho
LONDON, Sept 20 (Reuters) – The Chinese yuan skidded to its lowest in nearly three weeks on Monday, dragging down other risk and commodity currencies as worries about property developer Evergrande’s solvency spooked financial markets, while the safe-haven dollar rose.
Only on Thursday last week, the yuan hit its highest level in three months at 6.4275 per dollar. The sharp slump in the currency on Monday came on the back of warnings from Chinese regulators that Evergrande’s insolvency could spark broader risks in the country’s financial system if not stabilised.
Evergrande has been scrambling to raise funds to pay its many lenders, suppliers and investors. A deadline for the company to make an interest payment to creditors looms this week.
The fall in the yuan down to 6.4682 yuan per dollar – its lowest since Sept. 1 – also weighed on the Australian dollar, New Zealand dollar, and Norwegian crown, which all hit levels at or near three-week lows.
The Japanese yen strengthened 0.2% to 109.72 yen per dollar, although that was not enough to stop the dollar index benefiting from a safety bid.
Sterling, which also correlates with broader risk sentiment, fell 0.5% to a four-week low of $1.3662.
Against a basket of peers, the greenback was up almost 0.2% on the day and at its highest in four weeks. Across the Atlantic, the euro was 0.15% lower on the day at $1.1707 by 1041 GMT.
“FX markets start the week on a nervous footing, where the biggest threats are faced from the travails of Chinese real estate developer Evergrande and Wednesday’s FOMC (Federal Open Markets Committee) meeting,” said Francesco Pesole, G10 FX strategist at ING.
“Today also sees a tight Canadian election, where a failure to get a clear result may not help a CAD already under pressure as the commodity complex feels the strain.”
The Canadian dollar, also a commodity currency that correlates with risk sentiment, hit its lowest level in four weeks at C$1.2815 per dollar.
Polling for Monday’s national election in Canada points to an advantage for incumbent Prime Minister Justin Trudeau but a likelihood that he remains leader of a minority government.
CENTRAL BANK FOCUS
Looking forward this week, no fewer than a dozen central banks hold meetings, but traders’ top focus is on the Fed where expectations for a tapering signal are keeping the dollar bid.
The U.S. central bank concludes a two-day meeting on Wednesday and consensus is that it will stick with broad plans for tapering this year but will hold off providing details or a timeline for at least a month.
However creeping U.S. yields – which at the 10-year tenor rose for a fourth straight week last week – point to risks of a hawkish surprise…
Read More: CORRECTED-FOREX-Evergrande jitters pull risk FX lower, dollar gains