Euro struggles to make headway even as dollar rally fades; yen rebounds
The euro hovered around the $1.16 mark on Wednesday but failed to capitalize on a pause in the dollar's rally, while solid data out of China calmed nerves about recent Sino-U.S. trade tensions.
The dollar has weakened since hitting a three-week high on Monday when the prospect of a full-blown trade war increased demand for the currency. Traders said the dollar needed a fresh impetus or an escalation in the trade tensions to move higher.
"The Chinese trade data, coupled with the PBOC moves, is helping quieten markets, with range-bound trading," said Valentin Marinov, an FX strategist at Credit Agricole. "The main driver for markets at the moment is dollar buying and selling."
The People's Bank of China announced last week that it would impose a reserve requirement on forex forwards and wanted to see a stable yuan.
China's currency has since recovered some of its losses but was 0.2 weaker at 6.8380 in offshore markets, still off last week's 6.9125 lows.
"The USD appears increasingly vulnerable as recent movements in global bond markets erode the USD's fundamental support via narrowing interest rate differentials. The sentiment is likely to remain dominant, however, and markets remain vulnerable to headline risk and President Trump’s twitter feed," said Christophe Barraud at Paris-based Market Securities.
Traders say market sensitivity to trade war headlines has diminished and investors will want to see evidence the dispute is having a real impact before they panic.
China's July trade data, the first since the United States imposed tariffs on $34 billion of Chinese imports on July 6, showed a faster-than-expected rise in China's exports and imports. The country's trade surplus with the United States was little changed.
In a reminder the dispute has not disappeared, however, the U.S. Trade Representative's office said on Tuesday that the U.S. would begin collecting 25 percent tariffs on another $16 billion of Chinese goods later this month.
The yen rose half a percent after reports that Bank of Japan board members had disagreed on how far interest rates should be allowed to move from the central bank's target. The yen rose to 110.84, a one-week high.
Britain's pound skidded further as worries about Brexit weighed. It slipped below $1.29 and hit a nine-month low of 89.92 pence against the euro.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)