Dollar edged lower against a basket of currencies on Friday as news of an initial China-U.S. trade deal and an election victory for Britain’s Brexit-backing Conservative Party appeared to clear the fog on the global investment horizon, hurting safe-haven demand for the greenback.
The United States and China cooled their trade war, announcing a “Phase one” agreement that reduces some U.S. tariffs in exchange for increased Chinese purchases of American farm products and other goods.
The United States would suspend tariffs on Chinese goods due to take effect on Sunday, and reduce others, officials said. A deal is expected to be signed the first week of January in Washington by principal negotiators.
The long-awaited deal could dial down tensions between the United States and China and provide some relief to investors, who have been buffeted for months by worries that a full-blown trade war would pressure global economic growth.
“The market was flooded with many headlines this morning and some were contradictory, but overall we believed this weekend’s tariffs would probably be delayed or canceled, so the end result is not too surprising,” said John Doyle, vice president for dealing and trading at Tempus Inc in Washington.
China agreed to aim to purchase $50 billion in farm products a year, United States Trade Representative Robert Lighthizer told reporters at the White House on Friday.
Asked specifically about the $50 billion figure, officials in Beijing said that details on value will be disclosed later.
Lingering uncertainty about the deal kept investors from rushing into riskier currencies, analysts said.
“Some have been burned in the past for believing there was true progress, only to be disappointed,” Tempus’ Doyle said.
The dollar index, which measures the greenback against six major currencies, was down 0.18 percent at 97.22, after slipping as low as 96.719.
Appetite for trade-sensitive risky currencies, such as the Australian dollar, remained low. The Aussie was down 0.59 percent against the dollar.
The dollar was near flat against the Japanese yen – which tends to draw investors during times of geopolitical or financial stress, as Japan is the worlds biggest creditor nation.
Although the offshore yuan was initially boosted by trade deal hopes, it was last down about 0.9% versus the dollar.
Sterling was well-supported day as investors rushed to unwind bets on a weaker pound after a resounding election victory for Prime Minister Boris Johnson’s Conservative Party.
Johnson’s win will allow him to end three years of political paralysis and take Britain out of the European Union in an orderly manner in a matter of weeks.
The pound was up 1.31 percent at $1.3335.
Source: Reuters
