Dollar holds gains, yuan jumps from US-China trade pact
Against a basket of currencies, the US dollar hovered near a one-month high and was last at 101.54. (Freepik pic)
SINGAPORE : The US dollar retreated slightly today but held most of its gains on lingering optimism over a tariff deal between the US and China, which tapped the brakes on a trade war between the world's two largest economies.
Yesterday, Washington and Beijing announced an agreement to slash the massive tariffs they had imposed on each other for 90 days, sparking a relief rally across markets that swept up global stocks and sent the dollar surging.
'It's way better than the market was expecting,' said Rodrigo Catril, senior FX strategist at National Australia Bank.
'It's just an indication of, for one, the US administration is quite sensitive to the impact (tariffs are) having on the economy, and some would say there's been a serious walk back in terms of what they've done,' Catril said.
China's yuan scaled a six-month high, peaking at 7.1855 per dollar, which in turn lifted the Australian and New Zealand dollars.
The Aussie was up 0.64% to US$0.6412, while the kiwi gained 0.55% to US$0.5889.
The two Antipodean currencies are often used as liquid proxies for the yuan.
Elsewhere, the yen and the euro were recovering from their steep falls against a resurgent dollar in the previous session.
The yen was up 0.48% at 147.76 per dollar, having tumbled more than 2% yesterday.
Similarly, the euro rose 0.25% to US$1.1114, after sliding 1.4% overnight.
'In terms of magnitude, I think it's fair to say that the big moves have been seen. But for scope for an extension of the moves, I think particularly the euro and the yen will have a bias for those moves to extend a little bit further over the coming weeks,' Catril said.
The dollar fell 0.25% against the Swiss franc to 0.8429, reversing some of yesterday's 1.6% jump.
Sterling ticked up 0.16% to US$1.3199.
Against a basket of currencies, the dollar hovered near a one-month high and was last at 101.54.
The de-escalation of US-China trade tensions has in turn led traders to pare back bets of Federal Reserve rate cuts, on the view that policymakers would be under less pressure to ease monetary policy to support growth.
US Treasury yields rose in tandem, with the two-year yield steadying near a one-month high at 4.009%, while the benchmark 10-year yield was last at 4.4650%.
Futures show markets are now pricing in just about 56 basis points of Fed cuts by December. 0#USDIRPR
'The Fed has been focused on the increase in uncertainty. This will remain the case, although the announcement may remove some of the downside risk that had been prevalent had the higher tariff rates remained in effect,' said David Doyle, head of economics at Macquarie.
Data on US inflation is due later today, where expectations are for the core and headline numbers to have picked up on a monthly basis in April.
In cryptocurrencies, Bitcoin last traded at US$102,600, after surging to its highest since Jan 31 in the previous session.
Ether eased 1.1% to US$2,458.36, but strayed not too far from a more than two-month high hit yesterday.
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