By Meletus EZE
The dollar edged lower versus its peers on Wednesday, as rising hopes of a breakthrough in U.S.-China trade talks led investors to put money into the euro and Asian currencies.
The euro gained 0.1 per cent to 1.1335 dollar, while the Aussie dollar, often considered a barometer for global risk appetite, rose 0.3 per cent to 0.7112 dollar.
“We seem to have moved away from dollar dominance over the last two sessions…this weakness is directly related to the improving risk sentiment around trade,” said Michael McCarthy, chief markets strategist at CMC Markets.
“The euro has bounced off an important support level and can extend its gains.”
The kiwi dollar was the biggest gainer in the Asian session, rallying a whopping 1.6 per cent on the dollar to 0.6837 dollar after the Reserve Bank of New Zealand sounded less dovish on policy than markets had wagered on, forcing a round of heavy short covering.
Risk appetite in broader markets was revived after U.S. President Donald Trump said on Tuesday that he could let the March 1 deadline for a trade agreement with China “slide for a little while,”.
Trump added that he would prefer not to extend (the period) and expected to meet with Chinese President Xi Jinping to close the deal at some point.
U.S. tariffs on 200 billion dollars worth of imports from China are scheduled to rise to 25 per cent from 10 per cent if the two sides cannot reach a deal by the deadline.
This would increase pain and costs in sectors from consumer electronics to agriculture.
The main focus for the markets are the high-level talks this week in China, where the world’s two largest economies attempt to hammer out a trade deal.
Financial markets have been rattled by the trade tensions over the past year, with business sentiment taking a hit globally as the fallout of the U.S.-China dispute disrupted factory activity and hurt global growth.
The dollar index, a gauge of its value versus six major peers, was marginally lower at 96.65, having lost 0.35 per cent on Tuesday.
The dollar was steady versus the yen at 110.50, while sterling gained 0.1 per cent to 1.2900 dollar.
Traders expect the British pound to remain volatile over the coming weeks as a Brexit deadline looms.
The United Kingdom is on course to leave the European Union on March 29 without a deal unless Prime Minister Theresa May can persuade the bloc to amend the divorce deal she agreed last year.
The greenback was down 0.2 per cent versus the Canadian dollar at 1.3206, after weakening 0.5 per cent in the previous session.
The loonie has been supported by a rise in oil prices overnight due to improving risk appetite.——Reuters