Forex- U.S. Dollar Rises as Trade Deal Progresses

7 November 2019, 10: 25
© Reuters.


The U.S. dollar rose against haven currencies such as the yen and Swiss franc on Thursday but dipped against higher-yielders after reports that the U.S. and China have agreed to cancel trade tariffs, increasing hope that the two sides may sign a trade deal in the coming months.

It also rose against the euro and the British pound after comments from the EU Commission and the Bank of England underlined the weakness of the growth outlook in Europe.


Chinese Commerce Minister Gao Feng said Beijing and Washington have agreed to phase out tariffs imposed during their 16-month-long trade war. Canceling tariffs is vital to the phase one trade agreement, which both sides have agreed to do as negotiation progress is made, he added.


The two sides are working toward signing a deal this month but have yet to decide on a location for U.S. President Donald Trump and Chinese President Xi Jinping to meet. There was no immediate confirmation of Gao's comments from the U.S. side on Thursday, although it was consistent with recent U.S. media reports, but that didn't stop the offshore Chinese yuan rate hitting a three-month high against the dollar.


"The trade war started with tariffs, and should end with the cancellation of tariffs," Gao said at a news briefing.


The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, jumped 0.2% to 97.930 as of 10:28 AM ET (14:28 GMT).



The gains were mostly against currencies such as the franc and the yen, with USD/JPY up 0.2% to 109.20. It edged lower against the loonie and Aussie.



Elsewhere, sterling fell after the Bank of England cut growth forecasts, expecting the U.K. to grow at half the rate of 2018 due to slowing growth across the globe and the prolonged uncertainty over Brexit. The bank also hinted that it may cut interest rates soon if that uncertainty continues to depress output.



“If global growth failed to stabilize or if Brexit uncertainties remained entrenched, monetary policy might need to reinforce the expected recovery in U.K. GDP growth and inflation,” the bank said, after it left interest rates unchanged at 0.75%. For the first time in over a year, two policy makers dissented from the decision, pressing instead for an immediate rate cut.



GBP/USD was down 0.2% to 1.2817 while EUR/USD slipped 0.1% to $1.1053 after the European Commission cut its growth and inflation forecasts for the next two years.