U.S. dollar falls to 3 - week low as China's property fears

The Yuan added by ease of property fears, higher yields Updates throughout, boosts yuan quote LONDON, Oct 19 Reuters - The dollar retreated to a three-week low, hit by a proliferation in rate hike bets in other markets while the yuan surged to its highest in four months benefiting from greenback weakness and easing in properties market concerns.

A robust start to the United States' earnings season and hopes that China will be able to alleviate its Property Market Misaise boosted global stock markets, lifting currencies such as Australia and New Zealand Dollars and Norwegian Crown that benefit when risk sentiment and commodity prices are high.

The dollar index, which measures the greenback against six peers, was down for the first time since Sept. 28 as low as 93.501 before sinking to 93.565, 0.35% on the day.

A week ago the dollar index reached a new high of 94.563, benefiting from stagflation fears as well as betting on the Fed beginning to taper its stimulus next month, followed by interest rate increases next year.

Nevertheless, with Fed tightening priced in, money markets raise wagers for policy normalisation elsewhere, particularly in the UK where a cumulative 35 basis points in rate hikes are priced in by the end of the year.

New Zealand Data reported on Monday showed the fastest consumer price inflation in more than a decade.

The UK and New Zealand have led a consequent hike in short-term bond yields, with short-term yields climbing comparatively more than in the United States.

We had a big short position build-up in the Euro, Aussie dollar, Canadian dollars but after real U.S. yields fell back last week it took some heat out of the dollar rally which means we are seeing some short covering now, said Kenneth Broux, FX strategist at Societe Generale.

Dollar gains had been led by repositioning for Fed Funds rate and now we have a repricing in many other places added Broux.

The New Zealand dollar rose for the first time since September 14 as high as $0.715.

The Aussie reached a six-week high of $0.7474, shrugging off a dovish set of minutes from the Reserve Bank of Australia's last meeting.

The yuan was a standout gainer as Fears about contagion from property company Evergrande's debt troubles receded and some of its peers made bond coupon payments. Politicmakers said early last week that the situation was a controllable situation.

That, combined with the dollar pullback, took the Indonesian yuan as high as 6.3883 per dollar, the strongest since June 16. It reached 6.3785 in offshore trading, which is also the highest daily gain since June 16 and has served the highest daily gain since July.

Stephen Gallo of BMO Capital Markets said the moves also resulted from long-dated 10 year yields rising above 3% for the first time since July, a move which happened on Monday as Chinese yields rose globally.

The decline in Chinese government bonds prices may have caught FX investors by surprise, given the weak tone of China's Q3 economic data release, Gallo said. The Euro, where positioning this month turned net short for the first time since March, advanced to an average level of 0,4% to $1.167, a level not seen since Sept 29.

However Broux added that the European Central Bank ECB was the missing piece which could pressure the Euro against peers.

The assumption is they are at the end of the policy tightening timeline together with the Swiss and Bank of Japan, he added.

Bitcoin reached an all time high of $62,991 in cryptocurrencies, where bitcoin rose as high as it did in Bitcoin. 93 for the first time since mid-April, closing in on the all-time high of $64,895.