Home Forex Dollar edges lower amid hopes of progress in Sino-U.S. trade dispute

Dollar edges lower amid hopes of progress in Sino-U.S. trade dispute

by Paul
U.S.-China trade dispute

Hopes of progress in U.S.-China trade dispute boosted commodity-linked and riskier currencies resulting in the dollar easing against some of the other currencies

Hopes of progress in U.S.-China trade dispute boosted commodity-linked and riskier currencies resulting in the dollar easing against some of the other currencies on Wednesday.

As U.S. officials said that trade talks between China and the United States will continue for an unscheduled third day on Wednesday, increased appetite helped the Australian dollar which rose 0.2 percent to $0.7152, after touching a three-week high of $0.7172 in early trading.

The Australian dollar is often seen as a proxy for Chinese growth because of Australia’s export-reliant economy and China being the country’s biggest destination for its commodities.

Senior markets strategist at BNZ Markets in Wellington, Jason Wong noted the big slowdown in Chinese growth and the U.S. equity market ‘catching up’ to equity market weakness seen elsewhere…provide some incentive for a negotiated agreement to take place within the next few months.

The rally in risk assets has accelerated since last Friday when Federal Reserve Chairman Jerome Powell said he was aware of risks to the economy and would be patient and flexible in policy decisions this year.

The dollar index, which measures the greenback against a basket of six peers, gave up 0.1 percent to 95.787 in early trade. It gained 0.2 percent during the previous session, was around 11-week low of 95.638 early this week. However, the dollar was basically unchanged at 108.73 yen per dollar against the yen.

Chief currency strategist at Mizuho Securities, Masafumi Yamamoto said the market became too pessimistic about the global economy up to the beginning of the year, but it seems this kind of pessimism is fading.

Elsewhere, the euro gained 0.2 percent to $1.1457, but its rebound was not big enough to recover a slightly steeper loss booked during the previous session on concerns about a slowdown in the euro zone economy.

An unexpected fall in German industrial output for the third straight month weighed on the euro overnight. The drop was modest, but it underscored concerns about a slowdown and the European Central Bank’s caution as it tries to wean the region off stimulus.

The British pound gained 0.2 percent to $1.2742 on the day. Traders expect sterling to remain volatile over the next few weeks due to Brexit woes.

Mizuho’s Yamamoto said he thinks there will be another drama. Uncertainty dominates again over sterling. It will face downward pressure and the euro will suffer as well.

The British parliament is due to vote on Prime Minister Theresa May’s Brexit agreement on Jan. 15, and the run-up is likely to dominate trading in sterling. May is set to lose the vote unless she can convince opponents within and outside her party to back her deal.

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