The dollar ended the day lower, following the announcement of monetary easing measures aimed at reviving China’s economy. This announcement energized the market, particularly copper, a key supporter of the national currency and a metal predominantly purchased by the world’s second-largest economy.
“The dollar has seen further declines today after the announcement of economic support measures in China, which are driving copper prices up,” stated Ricardo Bustamante, deputy director of studies at Capitaria.
The value of the dollar in Chile on September 24, 2024
The dollar decreased by $11.94 compared to Monday’s close, now valued at $910.71 per unit. This marks two consecutive days of losses, totaling a decline of $19.09, a trend that has accumulated since the three-day closure of the exchange market for the National Holidays, which also coincided with rate cuts by the United States Federal Reserve.
Meanwhile, copper prices surged after China implemented a series of stimulus measures to revitalize its struggling economy.
Consequently, three-month copper prices climbed 4.07% to US$4.52 per pound on Comex. Additionally, the spot price for the metal increased by 2.93% to US$4.35 a pound on the London Metal Exchange, marking its highest daily rise since May 20 of this year (+4.41%) and reaching its peak since July 15, 2024.
The Chinese central bank unveiled its largest stimulus since the pandemic to invigorate the economy from its deflationary stagnation, but analysts cautioned that further fiscal support is essential.
“The market has been anticipating some form of action, and this is quite aggressive,” mentioned Ole Hansen of Saxo Bank in Copenhagen. “However, I am uncertain if it is substantial enough to propel the market into a strong rally. Chinese consumers need to feel secure enough to spend their earnings and savings rather than hoarding them or investing in gold,” he added.
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More about Coins
Signs of rising demand for metals in the world’s second-largest economy also bolstered the market.
Simultaneously, the dollar lost some value globally as the Chinese currency advanced. The Chinese yuan reached a 16-month high against the U.S. dollar on Tuesday after the central bank of the world’s second-largest economy announced new stimulus measures, while the greenback continued its downward trend following disappointing consumer data.
The value of the dollar in Chile on September 24, 2024
Beijing’s new measures include a planned 50 basis point cut in banks’ reserve requirements and a signal of potential further easing of lending rates, as well as initiatives to support the property market, which helped boost the yuan.
“They have delivered everything that people were hoping for: increased support for the housing market, reduced interest rates, lowered reserve rates, and support for the stock market,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“Initially, the market seems willing to give Beijing the benefit of the doubt (…) but I am not convinced that the underlying issues and challenges are genuinely being addressed.”
The dollar index also recorded further losses after economic data from the Conference Board indicated that U.S. consumer confidence unexpectedly dropped in September to 98.7 from 105.6 in August, significantly below the anticipated 104.0 according to economists surveyed by Reuters, as worries mounted regarding the labor market’s health.
The dollar index, which gauges the greenback’s performance against a basket of currencies including the yen and the euro, fell by 0.44% to 100.41. The dollar had been on a downward trajectory for three consecutive weeks due to expectations of a rate cut from the Federal Reserve, which last week reduced rates by 50 basis points.
The Dollar Declined as China Implements Economic Easing
The dollar closed the day lower, marked by the announcement of monetary easing measures aimed at reviving China’s economy. This announcement energized the market, particularly impacting copper prices, a key support for the national currency and a metal primarily purchased by the world’s second-largest economy.
“The dollar is experiencing further declines today, post economic support measures in China, which are boosting copper,” stated Ricardo Bustamante, deputy director of studies at Capitaria.
The dollar fell $11.94 compared to Monday’s close, now valued at $910.71 per unit. This marks two consecutive days of losses, totaling $19.09 within the context of a three-day halt in the exchange market due to National Holidays, compounded by recent rate cuts by the United States Federal Reserve.
Simultaneously, copper prices surged following China’s launch of a comprehensive set of stimulus measures to bolster its faltering economy.
Three-month copper prices witnessed a 4.07% rise, reaching US$4.52 per pound on Comex. In parallel, the spot price of copper increased by 2.93%, hitting US$4.35 per pound on the London Metal Exchange. This reflects the highest daily increase since May 20 of the current year and is the highest level seen since July 15, 2024.
China’s central bank has unveiled its most significant stimulus since the pandemic in an attempt to galvanize the economy from its deflationary state, although analysts caution that further fiscal support remains essential.
“The market has been seeking some form of action, and this is quite aggressive,” remarked Ole Hansen of Saxo Bank in Copenhagen. “However, I am not certain this is substantial enough to ignite an aggressive market rally. Chinese consumers need reassurance to spend their earnings instead of stashing them away or investing in gold,” he added.
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China Stimulus Measures Impact on the Dollar
Signs of heightened demand for metals in China, the world’s second-largest economy, further supported the market. As a result, the dollar weakened globally following the rise of the Chinese yuan, which hit a 16-month high against the U.S. dollar on Tuesday, after the announcement of new stimulus measures.
Beijing’s new measures encompass a planned 50 basis point cut in banks’ reserve requirements and the potential for further easing of lending rates, along with strategies to stabilize the property market, which collectively uplifted the yuan.
“They have met expectations across the board: enhanced support for the housing market, reduction in interest rates, and a cut in reserve rates,” noted Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “Initially, the market is inclined to view Beijing’s moves positively; however, I remain unconvinced that the fundamental issues are thoroughly addressed.”
Impact of U.S. Economic Data on the Dollar
The dollar index also faced additional losses following disappointing economic data from the Conference Board, which revealed that U.S. consumer confidence fell unexpectedly in September to 98.7, down from 105.6 in August. This was significantly below the anticipated figure of 104.0 according to economists surveyed by Reuters, as concerns regarding the labor market began to mount.
Overview of Dollar and Copper Markets
| Date | Dollar Value (CLP) | Copper Price (USD/lb) |
|---|---|---|
| Sept 22, 2024 | $922.65 | $4.35 |
| Sept 23, 2024 | $910.71 | $4.52 |
The dollar index, which gauges the greenback’s value against a selection of currencies including the yen and euro, shows a decline of 0.44%, reaching a value of 100.41. The dollar had been on a downward trend for three consecutive weeks due to anticipations of a rate cut from the Federal Reserve, which recently eased rates by 50 basis points.
Expert Insights
Market responses indicate that the recent shifts in China’s economic policies are set to create ripples not only across local markets but also globally. Observations suggest that as economies navigate the challenges posed by inflation, recession fears, and shifting consumer behaviors, the interplay between copper prices and currency valuations will be closely watched.
In summary, the dynamics of the dollar and copper intertwined with China’s monetary easing continue to unfold, prompting stakeholders to keep a vigilant eye on future developments and their implications on both local and international scales.
