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    Asian Session – Dollar falls back from 3-month highs; Gold slumps to 5-year low

    The dollar climbed to 3-month highs in early Asian session as the dollar index rose to 98.06. It drifted back later in the session, falling to 97.96. Boosting the dollar were broadly positive data from last week on the housing market, inflation and weekly initial jobless claims, which supported the case for a rate rise later in the year.

    Banks in Greece were set to reopen on Monday after remaining shut for three weeks. However, much of the restrictions are still in place and the only easing made was to change the daily withdrawal limit of €60 a day to weekly withdrawals of €420 a week. The German Chancellor Angela Merkel raised the prospect of debt relief over the weekend by extending maturities and lowering interest rates on Greek bonds but only if Greece was to pass the first assessment of its bailout terms.

    With the Greek crisis now appearing to be contained and Greece so far looking to comply with the terms of its new bailout, attention is once again shifting to the policy divergence between the Eurozone and the United States. With the European Central Bank committed to carrying out its asset purchases until the end of the program in September 2016, the US Federal Reserve will likely start to normalize rates at some point later this year.

    The euro hit a day low of 1.0819 dollars before climbing to 1.0842 dollars at the start of the European session. Against sterling, the single currency was flat for much of the Asian session and was last trading at 0.6941. Meanwhile, cable recovered from a low of 1.5581 to climb to 1.5616 at end of the Asian session.

    With Japanese markets closed for Marine Day and the absence of major data releases, Asian markets were quiet. Shares in China turned positive again having slipped to negative territory earlier in the session.

    The dollar peaked at 124.18 against the yen before retreating to 124.12. The aussie hit a fresh 6-year low of 0.7326 against the greenback but later rallied to 0.7396 as the dollar fell across the board in late Asian trading. Weakness in commodity and gold prices were the catalyst for the aussie’s latest bout of weakness. Gold prices slumped to a new 5-year low of $1071.18 but managed to quickly rebound to $1116.34.

    The kiwi was also trading near 6-year lows before bouncing back to 0.6591. Speculation that the Reserve Bank of New Zealand will cut interest rates again when it meets on Thursday have put pressure on the kiwi.

    The Canadian dollar recovered to 1.2962, having hit a 6-year low of 1.3007 against the greenback on Friday. With further weakness expected in crude oil prices, the loonie is unlikely to see a significant rebound any time soon. Brent crude oil prices were back below $57 at $56.98 as the Iran nuclear deal continued to dent prices.

    With an extremely light day ahead in terms of data, markets will be looking towards the meeting minutes from the Bank of Japan and the Reserve Bank of Australia on Tuesday.

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