Forex- US Dollar Rises as Trade Deal Progresses

Cornelia Mascio
Novembre 8, 2019

Some dollar buying ensued later in the day that limited the local units gains to 5 shillings against its US counterpart at the closing bell.

Overall, though, sentiment is likely to remain supportive for the dollar, equities, and other risky assets as efforts are being made to do a trade deal, which removes a huge risk to the global economic outlook.

The two countries have agreed to roll back tariffs on each others' goods in a "phase one" trade deal if it is completed, officials from both sides said on Thursday.

Caution appeared to be the order of the day across world markets. Chinese shares also reversed course from earlier gains with the blue-chip index flat.

"We had a lot of conflicting headlines and reports on the US-China trade negotiations, specifically whether or not a phase one trade deal. would include a reduction of existing tariffs", said Brian Daingerfield, head of G10 FX strategy, at Natwest Markets in Stamford, Connecticut.

"The trade deal is the predominant driver", for markets at the moment said Lars Kreckel, global equity strategist at Legal & General Investment Management, noting that a dip in stock markets was a just knee-jerk reaction to the latest news on the U.S.

Worries the pact could fall apart as there was still no specific agreement for a phased rollback prompted some investors to sell heading into the weekend.

"I'm less convinced that we're headed for a durable trade peace with China", he said.

German exports posted their biggest rise in nearly two years in September, data showed on Friday, providing some relief amid widespread concern that Europe's largest economy will dip into recession in the third quarter. There was no immediate confirmation of Gao's comments from the USA side on Thursday, although it was consistent with recent US media reports, but that didn't stop the offshore Chinese yuan rate hitting a three-month high against the dollar.

As financial specialists wind back their purchasing in safe resources, the 10-year U.S. Treasuries yield rose 11.8 premise focuses to 1.930%, denoting the greatest day by day increment since November 9, 2016, which pursued the unexpected political decision triumph by Donald Trump.

Hitherto, the BoE has resisted following the U.S. Federal Reserve and the European Central Bank in cutting its main interest rate, but the outcome of Thursday's meeting suggests the BoE is poised to change its stance. In the onshore market, the yuan traded at 6.9788 per dollar, and it was set for its fifth straight weekly gain, which would be the longest winning streak since February.

Crude oil futures meanwhile fell amid lingering uncertainty over the long-awaited trade deal and rising crude inventories in the United States. U.S. West Texas Intermediate (WTI) crude CLc1 lost 0.1% to $57.09 per barrel in Asia but has gained 1.4% so far this week.

Asian markets fell today as investors took their foot off the pedal after another healthy week, with eyes fixated on the next move in the China-US trade talks.

The euro was steady at $US1.1050 as was the dollar index unchanged at 98.154 after hitting three-week highs of 98.236 on Thursday.

In afternoon trading, the dollar rose 0.3% against the yen to 109.33 yen, after earlier climbing to its highest level in more than five months at 109.48 yen.

The 10-year Japanese government security yield rose to less 0.050%, a 5-1/2-month high, as desires for a Bank of Japan rate cuts disseminated in the previous week or thereabouts.

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