Chinese yuan hits three-week low as worries continue

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Chinese yuan hits three-week low as worries continue

Yuan skids from 3 - mth highs to 3 wk lows in Evergrande worries.

LONDON - Sept 20 Reuters -- The offshore Chinese yuan hit three week lows on Monday dragging lower other risk and commodity currencies, while the safe haven dollar rose as worries about Chinese property developer Evergrande's solvency spooked financial markets.

Only on Friday, the yuan hit its highest level in three months at 6.4297 per dollar. The sharp fall in the currency on Monday came on the back of warnings from Chinese regulators that Evergrande's collapse could spark broader risks in the financial system if not stabilised.

Evergrande has been scrambling to raise funds to pay its many lenders, suppliers and investors. A deadline to make interest payments to creditors looms in the next few days.

The move in the yuan, which had it fall to 5.4698 yuan per dollar - its lowest since August 31 - also dragged on the Australian dollar, New Zealand dollar and Norwegian crown, who 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 currency index from benefiting from a safety bid.

Against a stock market basket, the greenback was up almost 0.2% on the day and in four weeks its highest in four weeks. The euro was lower across the Atlantic on the same day at $1.1707 GMT and 55% lower than average in 0806 GMT.

FX markets started a week on nervous footing, where the biggest threats are faced from the works of Chinese real estate developer Evergrande and Thursday's FOMC Federal Open Markets Committee meeting, said Francesco Pesole, G 10 FX strategist at ING.

Today sees a tight Canadian election, where a failure to get a clear result may not help a CAD currently under pressure as the commodity complex feels the strain. The Canadian dollar, also a commodity currency that correlates with risk sentiment, reached the lowest price of C $1.2815 in four weeks at 17 December 2000 for $58.41 per dollar.

Polling for the Monday national election in Canada points to an advantage for incumbent Prime Minister Justin Trudeau but a possibility that he will remain leader of a minority government.

Ahead of the Fed Meeting 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 keep the dollar bid.

The Fed ends a two-day meeting on Wednesday and consensus is that it will hold the tapering in 2017 but keep providing details or a timeline for at least a month longer.

Creeping U.S. yields, however, which at the 10-year tenor rose for a fourth straight week last week, point to risks of a bullish surprise or a shift in projections to show hikes as soon as 2022, both of which could support the dollar.

We suspect the Fed may be mildly hawkish in the sense that it is likely to raise its 'dots' signalling one rate hike next year and for PMIs to remain lower a tad higher. If so the euro will usually finish the week lower, said Mikael Olai Milh j, chief analyst at Danske Bank.

Among the other major central banks, the Bank of England is expected to leave policy settings unchanged but traders see potential gains in the pound if the bank adopts a hawkish tone or more members call for asset buying tapering.

There is no expectation that policy shifts at the resolutely dovish Bank of Japan on Wednesday, but one day later Norway's Norges Bank is expected to become the first central bank of the G-10 to lift rates.

Bitcoin dropped over 5% at one point, with the Bitcoin price more than $473,773 in circulation.