US dollar loses steam, set to end weak flat amid trade uncertainty

[NEW YORK] The dollar gave up early gains to trade slightly lower on the day against a basket of currencies on Friday as a still unsigned partial US-China trade deal kept investors on edge and the shortened holiday week limited currency moves.

The dollar index, which compares the greenback against six other major currencies, was down 0.12 per cent at 98.253. Earlier in the session, the index rose as high as 98.544, its highest since Oct 15. For the week, the index was about flat.

China warned the United States on Thursday it would take "firm countermeasures" in response to US law backing anti-government protesters in Hong Kong, and said attempts to interfere in the Chinese-ruled city were doomed to fail.

US President Donald Trump on Wednesday signed into law congressional legislation which supported the protesters, despite angry objections from Beijing, with which he is seeking a deal to end a damaging trade war.

"I think it's a lacklustre market mood today, that tone was set with the muted FX response to Trump signing the HK bill late on Wednesday," said Amo Sahota, director at Klarity FX in San Francisco.

"Late session gains for sterling and euro have weighed on the US dollar, and it looks like enough work has been done to prevent US dollar index closing above 98.45, which would have setup a bullish range break," Mr Sahota said.

The euro was 0.09 per cent higher against the greenback after data showed eurozone inflation accelerated faster than expected in November on a rise in food and services prices. Annual inflation rates however remained far lower than European Central Bank expectations.

The pound hovered around US$1.29 on Friday, showing little reaction to political headlines, with analysts expecting little movement in the run-up to the UK general election on Dec 12. The pound was last up 0.2 per cent at US$1.2937.

Against the Japanese yen, which tends to attract investors during times of geopolitical or financial stress as Japan is the world's biggest creditor nation, the dollar slipped 0.09 per cent.

"The dollar index is lower on the session but on the month it has been solid," Mr Sahota said.

For the month, the dollar index was up 0.9 per cent, its best monthly performance since July.

The US currency has found support recently from positive economic data that show the world's biggest economy is on a firm footing.

US economic growth picked up slightly in the third quarter, data showed on Wednesday, in contrast to other indicators pointing to a slowdown in global activity.

The shortened trading week due to the Thanksgiving holiday in the United States has kept currency moves muted this week.

REUTERS