Greenback trades near one-month lows

London

THE US dollar traded near one-month lows on Wednesday as markets remained jittery about the progress of Sino-US trade talks and waited for US data that could show whether the prolonged trade spat is starting to damage consumption in the United States.

A Bloomberg report that the two sides were close to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal boosted the offshore-Chinese yuan by 0.2 per cent to 7.05.

It had languished around seven-week lows to the US dollar after US President Donald Trump said on Tuesday a trade agreement may be delayed until after November 2020 US elections.

But the report failed to significantly budge the greenback. Against a basket of its rivals, it traded at 97.753, above Tuesday's trough of 97.644, its lowest since Nov 11.

"We have been down this road before on the trade agreement headline front so markets will take these headlines with a pinch of salt and investors are focusing on the US data," said Manuel Oliveri, a FX strategist at Credit Agricole in London.

US non-manufacturing ISM data is the highlight for currency traders to gauge whether the weak manufacturing ISM print earlier this week will spill over into the services sector ahead of the important monthly US jobs data later this week.

The greenback declined nearly one per cent in the first two trading days this week as decent eurozone data and surprisingly strong China survey figures raised hopes that the global economy will pick up traction next year and boost demand for non-US currencies.

Mr Trump's statement that he had "no deadline" for an agreement with China hurt sentiment and boosted demand for the greenback as investors added long positions on a currency whose interest rates remained higher than most of its developed market rivals. Investors are flocking to the currency which offers the highest interest rate and that is the US dollar, according to Morten Lund, a senior FX strategist at Nordea.

The Australian dollar was the biggest loser against the US dollar, falling 0.5 per cent versus the greenback after some disappointing third-quarter growth data and retracing a cumulative gain of 1.5 per cent in the last two sessions.

The pound was the only currency to buck the broader market trend, gaining a third of a percentage point against the US dollar and the euro, before an election next week.

Elsewhere, the yen stood at 108.60 yen versus the US dollar on Wednesday, close to its strongest since Nov 22. The Swiss franc was quoted at 0.9875 versus the US dollar, near its highest level since Nov 4. REUTERS