* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, Aug 19 (Reuters) - The euro advanced on Monday after
registering its biggest weekly drop in nearly two months as risk
appetite gradually returned to global markets after a week of
turmoil, though investors were still wary about the near term
outlook for the single currency.
With hopes of fiscal stimulus from Germany growing and steps
by China over the weekend to cut corporate lending costs pushing
up equities, growth-sensitive currencies such as the Australian
dollar also edged higher. and But despite the gains, the perceived safe-haven currencies
such as the Japanese yen JPY=EBS and the Swiss franc CHF=EBS
remained firmly in demand with sight deposits at the Swiss
National Bank registering another big weekly rise, indicating
more intervention from policymakers. "Markets seem to be recovering after last week's selloff
though some of the safe haven currencies still seem to be in
demand," said Adrian Schmidt, chief FX strategist at Continuum
Economics based in London.
"But authorities can only slow the appreciation trend in
some of those currencies such as the Swiss franc rather than
drawing a line in the sand," he said.
JP Morgan expects the franc to appreciate to 1.07 francs per
euro by the end of the year compared to 1.08755 francs now.
Against the greenback EUR=EBS , the euro rose 0.2% to
$1.1114 in London trading after falling 1% last week, its
biggest weekly drop since early July.
FED EYED
Investor optimism is also likely to be capped before a
speech by U.S. Federal Reserve Chairman Jerome Powell later this
week at the Jackson Hole central bank conference.
Market strategists believe his comments will be aimed at
reassuring nervous markets that the Fed will remain in an easing
stance and set the stage for more rate cuts after a quarter
percentage point rate cut in July.
"Powell's speech will set the stage for, at the minimum, a
25 basis points rate cut at the September meeting, stressing
that quantitative tightening is over and stressing that the
committee's bias is now back in accommodation mode," said
Elsa Lignos, global head of FX strategy at RBC Capital Markets.
Money markets are pricing in a cumulative 67 basis points of
rate cuts from the Fed by the end of the year.
The dollar index .DXY , which measures the greenback
against six major currencies, was broadly steady at 98.20, close
to a two-week high of 98.339 reached on Friday.
Global markets went into a tailspin last week after bond
yield curves inverted, signalling the global economy was headed
towards a recession, sending panicky investors to the relative
safety of perceived safe-haven assets such as gold and yen.
Latest weekly positioning data showed hedge funds ramped up
their holdings of the Japanese currency for a second consecutive
week versus the greenback.
Against the yen JPY=EBS , the dollar was little changed at
106.57 yen, near a one-week high of 106.98 yen.
SNB sight deposits and EURCHF https://tmsnrt.rs/2Z1lLXq
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>