Dollar lowers as US-China trade talk result awaited
LONDON (Reuters) – The dollar drifted lower against other major currencies on Wednesday as investors awaited fresh developments in the US-China trade talks.
As the United States and China work to narrow their differences enough to sign a “phase one” trade deal as early as this month, hopes of a breakthrough have boosted sentiment across world markets.
But after sizeable moves on Tuesday, which included a strengthening in China’s offshore yuan to three-month highs against the dollar, currency markets moved into wait-and-see mode.
That sentiment was echoed in global stock markets, which steadied after a three-day rally.
“The market now wants confirmation that there is a venue, that this [phase one deal] will be signed,” said Jane Foley, senior currency strategist at Rabobank.
“A lot of good news was built into the price and unless we get something more, a little bit of disappointment will come through.”
At 11:30 GMT the dollar index, which measures the dollar’s value against other major currencies, was a fifth of a percent lower at 97.798 after rising 0.4% the previous day.
The dollar was 0.2% softer at 109.01 yen, although still within sight of a three-months high hit last week at 109.285.
Europe’s common currency, meanwhile, was a touch firmer at $1.1089, having dropped 0.5% against a broadly-robust greenback on Tuesday.
The Swiss franc changed hands at 0.9929 to the dollar, little changed on the day, following its 0.5% fall the previous day.
Analysts said better-than-expected US economic data in the past week had eased expectations for further easing from the US Federal Reserve and that this boded well for the dollar outlook.
A survey of the vast US service sector published on Tuesday showed that business sentiment had improved in October from a three-year low in September. The rebound is a welcome sign for dollar bulls as a fall in the service sector index would have suggested that the malaise among manufacturers hit by the trade war was also infecting the service sector. That followed a strong US employment report on Friday.
“Latest data has helped eased concern about a sharp slowdown in growth,” said Lee Hardman, a currency strategist at MUFG.
“We have now had the US ISM and jobs report and they were both stronger than expected and that provides a firm foundation for the dollar this month.”
Data released on Wednesday showed German industrial orders rose more than expected in September, offering a glimmer of hope for an export-powered economy hit hard by global trade tensions.
The generally positive mood supported the risk-sensitive Australian dollar, which changed hands at $0.6899. It was little changed on the day but has maintained gains of 3.4% since hitting a 10-1/2-year low on October 2.
China’s offshore yuan steadied around 7.00 per dollar in Europe after having risen to a threemonth high of 6.9867 to the dollar on Tuesday on hopes for a trade truce.
The currency has gained almost 3% from its record low in the offshore trade marked in early September.