Dollar set for second week of declines but outlook bullish

The US dollar slipped against its rivals on Friday and is set for a second consecutive week of decline as news that heavily-indebted property firm China Evergrande Group (3333.HK) had averted a default buoyed appetite for risky assets.

Concerns over the embattled property developer whose liabilities are equal to 2 per centof China’s gross domestic product had sent investors flocking to the perceived safe-haven currencies like the US dollar and government debt.

Worries of economic contagion have seen swathes of other heavily-indebted developers hit with credit rating downgrades.

But days before a deadline that would have plunged the embattled developer into formal default and sent shockwaves through global markets, the company had supplied funds to pay interest on a US dollar bond. read more

“So while this is good news in terms of a formal imminent default being avoided over the weekend, uncertainty is set to remain high until there is further clarity on Evergrande’s position and the position of other property companies in China,” MUFG strategists said in a daily note.

The dollar index edged 0.1 per centlower to 93.61, putting it on track for a second straight week of falls.

But the broader market narrative remained supportive of more US dollar gains as rising bond yields on the back of firmer inflation expectations are expected to lend support to the greenback.