FILE PHOTO: A packet of U.S. five-dollar bills is inspected at the Bureau of Engraving and Printing in Washington March 26, 2015. REUTERS/Gary Cameron
November 7, 2019
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The dollar gained against the safe-haven yen and Swiss franc on Thursday, bolstered by comments from a Chinese commerce ministry official that suggested the world’s two largest economies are inching closer to a trade deal.
The Chinese commerce ministry said on Thursday Beijing and Washington have agreed to cancel in phases the tariffs imposed during their months-long trade war, but specified no timetable.
The proportion of tariffs canceled for both sides to reach a “phase one” deal must be the same, but the number to be canceled can be negotiated, he said.
The dollar rose to near three-month highs versus the yen after the news, retracing its 0.3% losses earlier in the session, as investors interpreted the comments as positive news. It was last up 0.2% at 109.19 yen.
The dollar also gained against another safe haven, the Swiss franc, trading up 0.2% at 0.9946 franc <CHF=>.
Investors tend to sell the yen and Swiss franc in times of improved risk sentiment.
Some analysts, though, cautioned about reading too much into China’s comments.
“It’s a very mild risk-on day. The Chinese news has already been factored in and markets are very tentative pricing in headlines that don’t necessarily add much,” said Simon Harvey, FX market strategist, at Monex Europe in London.
“We have already filtered through the Phase One deal. We have already filtered through the de-escalation of tariffs. You see these headlines, but nothing really has been put in the diary,” he added.
Hopes for a trade deal had been waning after a senior official of the Trump administration told Reuters on Wednesday a meeting to sign the deal could be delayed until December and that a venue had not yet been agreed.
The Australian and New Zealand dollars – proxies for risk which had been weakening due to uncertainty surrounding the possible trade deal – also gained on the comments with the Aussie up 0.3% versus the dollar at US$0.6902. <AUD=D3>.
Against a basket of currencies, the dollar was slightly higher at 98.075 <.DXY>.
The euro was down at 0.2% against the dollar at $1.1051 <EUR=>, having hit three-week lows earlier in the session.
The pound, meanwhile, fell to two-week lows against the dollar and was last down 0.3% at $1.2820 <GBP=> after two Bank of England officials unexpectedly voted to lower interest rates on Thursday to ward off an economic slowdown.
The BoE did keep the bank rate steady at 0.75%, but other bank officials including Governor Mark Carney said they would consider a cut if global and Brexit headwinds do not ease.
“The BoE’s “mixed messaging suggests that the bar remains quite high for sterling to register a large and sustained move on the back of today’s decision,” TD Securities said in a research note.
But it added that sterling is likely to remain rangebound against the dollar over the next few weeks, with investors focused on the UK general election on Dec. 12.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Elizabeth Howcroft in London; Editing by Jonathan Oatis)
