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Dollar edges down as rally fades, China's yuan holds firm

Dollar edges down as rally fades, China's yuan holds firm

Wed Aug 08 2018

 

The US dollar inched lower against a basket of currencies on Wednesday as its recent rally on concerns over escalating trade tensions showed signs of fading, while the offshore yuan held firm near a one-week high.

 

The dollar was a touch lower even after the US Trade Representative's office said late on Tuesday that the US would begin collecting 25 per cent tariffs on another $16 billion in Chinese goods later this month.

 

The move is the latest by US President Donald Trump to put pressure on China to negotiate trade concessions after imposing tariffs on $34 billion in goods in July. China has vowed to retaliate to an equal degree.

 

In early trade on Wednesday, the dollar was down about 0.1 per cent down on the day against a basket of six currencies , trading at 95.133. Overnight, it had dropped about 0.4 per cent before retracing some losses.

 

“Market reaction to the headlines about the US-China trade war is waning,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities. “If there are clear signs of a slowdown of the US economy due to the tariffs imposed in July, then I think the market will begin to price in slower rate hikes or no rate hikes by the Federal Reserve.”

 

Since mid-April, the dollar index has risen more than 6 per cent, as the Federal Reserve raised interest rates, supporting dollar-buying. In early trade on Wednesday, China's offshore yuan and the Australian dollar were firm against the dollar. The offshore yuan was more than 0.1 per cent higher at 6.8140 yuan per dollar, changing hands near a one-week high of 6.8063.

 

The Aussie gained 0.1 per cent to $0.7431 against the greenback. Overnight, it had rallied more than half-a-per cent before giving up some gains. The euro and the yen edged up a tad, trading at 1.1604 and 111.34 per dollar.

 

Source: Reuters

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Tuesday, December 04, 2018
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