TOKYO, Feb 25 — The risk-sensitive Australian dollar rose and the yen sagged in early Asian trade today after US President Donald Trump said he will delay increasing tariffs on Chinese goods on March 1, citing “substantial progress” made in…
LONDON, Feb 1 — The offshore yuan was headed for its worst daily decline in over five months today after weak economic data out of China damaged risk sentiment and weighed on the Australian dollar. China’s gloomy factory readings have brought…
SINGAPORE: The dollar eased versus most of its peers on Monday as investors turned their attention to this week’s Federal Reserve policy meeting, with traders wagering policymakers will signal a pause in their tightening cycle.
The Federal Open Market Committee meets between Jan 29-30, and Chairman Jerome Powell is widely expected to acknowledge growing risks to the US economy as global momentum weakens.
The dollar fell 0.2% versus the offshore yuan to 6.7406. The rally in the yuan also fuelled a bounce in the Australian dollar, which gained 0.18% versus the dollar to $0.7195. Kiwi dollar strengthened by 0.3% to $0.6859.
“The general direction for the dollar is still down and markets will be taking cues from the FOMC this week,” said Sim Moh Siong, currency strategist at Bank of Singapore.
“The Fed will most likely keep rates steady this year given the state of economic growth outside the US”
The dollar index, a gauge of its value versus six major peers was marginally lower at 95.74, after falling 0.8% on Friday.
A deal to reopen the US government for now after a prolonged shutdown also reduced investor demand for the safety of the greenback.
‘The re-opening of Federal government after one-month shutdown fuelled ‘risk on’ rally in the US equities and slashed demand for safe-haven currency like USD, leading to sharp decline of the dollar index last Friday,” said Margaret Yang, markets analyst at CMC Markets.
Over the past two months or so, Powell and several other Fed policymakers have taken a more cautious approach on further monetary tightening, leaving the dollar underpowered after it enjoyed a boost from the Fed’s four rate increases last year.
Traders are bearish on the dollar for 2019.
Amid a weakening global economy and US-Sino trade tensions, the US central bank is widely expected to hold rates steady this year to avoid hurting growth at home. Interest rate futures markets are pricing in no rate hikes for 2019.
Investors are also anxiously waiting news from high-level US-China trade talks on Tuesday and Wednesday to see if the world’s largest economies can reach a compromise that will end their trade war. President Donald Trump has threatened to hike tariffs on Chinese goods if there is no significant progress in the negotiations.
The yen added 0.2% in early Asian trade at 109.34.
The dollar has gained around 1.2% on the yen over the last two weeks. Not helping the yen was the Bank of Japan’s downgrade of its inflation forecasts last week when it also maintained its accommodative monetary policy, as widely expected.
Moreover, Japanese investors have been net buyers of foreign bonds over the last few weeks, stoking demand for dollars. This likely explains why the safe-haven yen has not appreciated during this period even though risks of a global economic slowdown have rattled investor sentiment.
The euro was marginally higher at $1.1411.
The single currency managed to cling on to a 0.4 percent gain made last week despite the European Central Bank downgrading its growth forecasts for the near term.
Growth data out of Europe’s economic powerhouses such as Germany and France has been weaker-than-expected and analysts expect the ECB to remain dovish for an extended period.
Traders believe Europe’s slowdown and a dovish ECB are priced into the euro, which has traded in a $1.12-$1.16 range over the last three months.
Sterling was marginally lower, fetching $1.3193.
Cable gained 2.5% last week after a report in the Sun newspaper that Northern Ireland’s Democratic Unionist Party had privately decided to offer conditional backing for British Prime Minister Theresa May’s Brexit deal this week.
However, Ireland’s Deputy Prime Minister Simon Coveney said on Sunday the backstop was already a compromise drawn up to meet May’s negotiating red lines, and the EU and Ireland were united in the view it “was not going to change”.
Analyst expect sterling to remain volatile. Britain is set to leave the European Union on March 29, but the country’s members of parliament remain far from agreeing a divorce deal. – REUTERS
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LONDON: The euro and Australian dollar led the rally against the US dollar yesterday after Washington and Beijing’s agreement for a ceasefire in their trade war encouraged investors to sell the greenback and buy into riskier assets.
Emerging market currencies also surged higher, with China’s offshore yuan gaining more than 1%.
US President Donald Trump and China’s President Xi Jinping have agreed a 90-day cease-fire in their trade dispute during which they will try to bridge their differences.
“Even though it’s a 90-day truce and both US and China still need to sort out multiple issues in this period, from markets’ perspective getting past the event risk with a positive outcome and de-escalation of tensions is clearly positive for risk sentiment,“ said Mayank Mishra, global macro strategist at Standard Chartered.
Currencies hit hard during the trade dispute amid fears of the potential damage to the global economy recovered sharply. The Australian dollar rocketed 1% to US$0.7386.
China is the biggest buyer of Australian exports and the worry has been that any hit to Chinese demand would hurt international trade.
The Canadian dollar rose 0.9% to C$1.3162, while the Norwegian crown added 1% helped by the improved market sentiment and soaring oil prices.
The euro also capitalised on the dollar weakness, adding more than half a percent to US$1.1379. That takes the euro further away from its 2018 low hit last month of US$1.1216.
The dollar index, which measures the greenback against a basket of major peers, fell 0.6% to a day’s low of 96.719.
Trade tensions have been one of the biggest drivers of dollar strength in 2018.
“The reduction in global trade tensions has delivered a second successive blow for the US dollar. It follows hot on the heels of the recent dovish shift in Fed communication,“ MUFG analysts said, referring to recent comments from Federal Reserve officials that suggested the current interest rate hiking cycle may end sooner than expected.
The offshore yuan gained more than 1% to 6.8790, although analysts said with China’s economy on less steady ground than a year ago relief for the yuan may be temporary.
Other emerging market currencies jumped. The South African rand added 2%, while the Mexican peso was 1.8% higher. The Russian rouble added 1.1%. The Japanese yen slipped slightly to 113.48.