Signs that the U.S. and China were making progress in efforts to resolve their trade dispute supported both the dollar and trade-exposed Asian currencies on Tuesday, while the Canadian dollar rose as voters went to the polls in a closely-fought election.
The volatile pound sat just under a 5-1/2-month high at $1.2962, with the Brexit project in disarray but traders looking to another crucial parliamentary vote on Tuesday to determine the next step.
U.S. President Donald Trump said in Washington that work toward ending the U.S.-China dispute was going well, while White House adviser Larry Kudlow said tariffs scheduled for December could be withdrawn if progress is made.
Meanwhile Commerce Secretary Wilbur Ross said that while a deal may not be finalized next month, that was less important than securing “the right deal,” following Chinese Vice Premier and chief negotiator Liu He saying last week that Beijing is approaching talks from a basis of mutual respect.
“A concerted effort from both countries to manage market expectations of a longer negotiation was well accepted,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney.
“It is now clear to investors that a comprehensive trade agreement will require many months of discussion.”
The dollar was steady against most major currencies in early Asian trade, holding only a fraction below a three-month high against the Japanese yen at 108.58 yen per dollar.
It lifted from a two-month low touched against the euro overnight to steady at $1.1148, and was flat against a basket of currencies at 97.304.
The Canadian dollar – the best performing G10 currency this year – climbed to a three-month high of 1.3082 per dollar overnight as voters turned out in an election expected to be too close to call.
It held near that level as the first polls closed, with Prime Minister Justin Trudeau seeking to cling to power against a strong challenge from opposition Conservatives.
The trade exposed Australian and New Zealand dollars drifted higher, though remained marginally below one-month peaks that both currencies touched overnight. The Aussie last traded at $0.6867 and the kiwi at $0.6409.
The pound held steady at $1.2969, with Brexit developments set to determine its fate.
With just over a week before Britain is due to leave the European Union, Boris Johnson’s push to re-run a parliamentary vote he lost on the weekend was rejected.
But he has resolved to press on with seeking to pass Brexit-related laws in parliament on Tuesday, with their progress to determine the timeline.
“While markets haven’t seen fit to reverse last week’s optimism that saw sterling smartly higher they aren’t yet prepared to take the pound up to the next level,” said National Australia Bank Head of FX Strategy Ray Attrill.
Source: Reuters
