Forex

Dollar firms above 1-month lows on trade tensions

Reuters TOKYO | Updated on December 04, 2019 Published on December 04, 2019

File Photo   -  Reuters

The dollar held firm above a one-month low against its rivals on Wednesday as uncertainty about the progress of trade talks between the US and China fuelled demand for the greenback.

The dollar had come under some pressure this week as some decent eurozone data and surprisingly strong China survey figures raised hopes that the global economy will pick up traction next year and boost demand for non-US currencies.

The greenback fell 1 per cent in the first two days of the week, taking it to a one-month low versus its rivals before the latest headlines rekindled some safe-haven demand.

US President Donald Trump's statement that he had “no deadline” for an agreement with China hurt sentiment as global trade frictions have already weakened world growth, with many economies struggling to find their footing.

“There is so much uncertainty with regards to trade and the economic outlook, and in that environment, investors are flocking to the currency which offers the highest interest rate and that is the dollar,” said Morten Lund, a senior FX strategist at Nordea.

In early trading on Wednesday, the dollar edged up to 97.764, above a low of 97.644 hit on Tuesday, its lowest level since November 11.

Market analysts said the dollar could only weaken substantially if US economic data showed a sharp decleration and expectations of rate cuts grew sharply. Money market futures point to a rate cut of one quarter point by next July.

The Australian dollar was the biggest loser against the dollar, falling 0.5 per cent versus the greenback after some disappointing third quarter growth data and retracing a cumulative gain of 1.5 per cent in the last two sessions.

Elsewhere, the yen stood at 108.60 yen versus the dollar on Wednesday, close to its strongest since November 22. The Swiss franc was quoted at 0.9875 versus the dollar, near its highest level since November 4.

Both the Japanese and Swiss currencies tend to be bought as safe-havens during times of uncertainty.

 

Published on December 04, 2019
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