After relief, currencies await details on US-China trade deal
Trade deal relief gives way to caution
LONDON: Trade-sensitive currencies such as the Australian and New Zealand dollars drifted lower yesterday as relief following last week’s US, China trade agreement gave way to frustration over a lack of details and a reluctance to make big bets as Christmas draws near. Sterling continued to outperform other major currencies in the wake of last week’s resounding election win for British Prime Boris Johnson’s Conservative Party, while the euro was a touch firmer ahead of key business activity data. Washington and Beijing cooled their trade war last week, reducing some US tariffs in exchange for what US officials said would be a big jump in Chinese purchases of American farm products and other goods.
That had lifted the Australian dollar and pushed down the safe-harbor yen last week, before profit taking set in. “While there is significant relief over the trade deal, a lot of that would have been in the price already, so now there is a chance that trade relations could be strained again and we know a second phase of the trade agreement will be difficult,” said Jane Foley, senior currency strategist at Rabobank in London. The tradesensitive Australian dollar fetched $0.6874 , easing from Friday’s four-month high of $0.6939.
The New Zealand dollar was down 0.5% at $0.6596 after climbing to $0.6636 at one stage on Friday, a four-month high. The Chinese yuan traded at 6.9959 per US dollar, still stronger than the symbolic 7 mark but below the four-month high of 6.9589 that it hit last week. Both currencies found some support from slightly stronger-than-expected Chinese production and consumption data. The euro was a touch firmer at $1.1133, with focus in Europe turning to the release of “flash” business activity data for the single currency bloc.
The dollar was a tad firmer at 109.45 yen although the dollar index, which measures the greenback’s value against a basket of currencies, was almost 0.2% lower on the day at 97.00. Markets were awaiting fine details of the trade deal, which has not been signed yet. US Trade Representative Robert Lighthizer said on Sunday the deal would nearly double US exports to China over the next two years and was “totally done” despite the need for translation and revisions to its text. A date for senior US and Chinese officials to formally sign the agreement was still being determined, he added.
“We have seen over time more reports about the differences between what the US said and what China said about the agreement,” said Takafumi Yamawaki, head of fixed income research at JPMorgan Securities in Tokyo. “The US talks about the size of US farm products China will buy but China stayed mum.” Elsewhere, sterling climbed back towards Friday’s peaks against the dollar and euro, on expectations that last week’s election win for the ruling Conservative Party will end near-term Brexit uncertainty. The British pound was last trading at $1.3380, 0.4% firmer on the day. —Reuters