Trade talks spark dollar retreat, Aussie and yen lead currency gains
TOKYO, May 2 — The US dollar ceded ground to the Swiss franc, Australian dollar, euro and yen today as signs of a thaw in trade tensions lifted investors' appetite for riskier assets while they awaited US jobs data due later in the day.
The risk-sensitive Aussie and kiwi dollars climbed as European and Asian shares continued a rally that began on Wall Street against the backdrop of updates from China and Japan on tariff discussions with the Donald Trump administration.
The euro was up 0.3 per cent and China's offshore yuan strengthened to a near one-month high.
The US dollar was still on track for a third straight weekly advance. Alongside US Treasuries and shares, it has bounced from steep declines last month as President Donald Trump's erratic tariff policies drove fears of a recession and sapped confidence in US assets.
'The dollar has benefited from month-end flows,' said Kenneth Broux, head of corporate research FX and rates at Societe Generale.
He said the dollar had been supported earlier this week by the Bank of Japan's dovishness yesterday as well as strong earnings reports from US tech giants, the rally on Nasdaq and flows into US equities.
'Maybe the whole sell America story looked a little bit overdone. And we saw Japanese investors also buying the most foreign bonds in eight weeks, tempering expectations that everybody in the world is going to sell Treasuries,' Broux said.
US Secretary of State Marco Rubio told Fox News late yesterday that talks with China will come up soon. His comments came on the heels of a Chinese state media report seen as a signal of Beijing's openness to trade negotiations.
Beijing is 'evaluating' an offer from Washington to hold talks over Trump's tariffs, China's Commerce Ministry said today.
Separately, Japan's top trade negotiator, Ryosei Akazawa, said he deepened talks on trade, non-tariff measures and economic security cooperation with US Treasury Secretary Scott Bessent in Washington yesterday.
And Finance Minister Katsunobu Kato said Japan could use its US$1 trillion (RM4.28 trillion) plus holdings of US Treasuries as leverage in trade talks with Washington.
US stocks rose yesterday, driven by positive tech earnings and a slightly better-than-expected manufacturing report even though it showed factory activity contracted further last month.
The dollar index dipped 0.23 per cent today, still poised for a 0.3 per cent gain in a week of relatively light trading due to holidays. The euro edged up 0.33 per cent to US$1.1329 from near a three-week low.
The Australian dollar rose 0.55 per cent to US$0.6418, and the Swiss franc added 0.3 per cent to 0.8265 per US dollar.
The greenback traded at ¥144.875, after earlier touching 145.91, the strongest since April 10. The yen sank yesterday after the Bank of Japan left interest rates on hold and lowered growth forecasts due to US tariffs, essentially signalling a pause in rate hikes for more clarity on the fallout from the trade measures.
Market participants are now looking to the non-farm payrolls (NFP) report for an indication on when the Federal Reserve will resume cutting rates. Wall Street economists are forecasting 130,000 new jobs created last month, compared with a print of 228,000 seen in March.
Societe Generale's Broux said a number far from the consensus would actually be better, helping clarify whether the US was heading for a recession, which would mean more Fed rate cuts, or would avoid a sharp slowdown.
'And the question is whether we sell that dollar rally again, because that has been the modus operandi in FX now for a couple of weeks that we've been selling dollar rallies, especially against the euro.' — Reuters
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