Dollar is rising as concerns about US-China talks grew

The dollar rose on Monday as fears are growing that talks between the US and China this week will not cure a rift in trade between the world’s largest economies.

The greenback is lifted by its safe-haven appeal as investors, worried about the sharp global slowdown, pile into the world’s most liquid currency.

It is headed for an eighth consecutive day of gains.

U.S. negotiators this week will press China to reform how it treats U.S. companies’ intellectual property.

High-level negotiations in Beijing are a leading focus for investors, many of whom see little prospect of a trade deal, and instead expect an extension of the deadline on March 1 for a decision to increase tariffs.

Emerging markets and China-sensitive currencies such as the Australian dollar are likely to be affected by the development of the trade dispute this week.

The strength of the dollar has emerged, although the Federal Reserve striking a cautious tone during its January policy meeting.

“The U.S. currency is currently in demand as a safe haven. This is reflected in the fact that the Swiss franc and the Japanese yen – also typical safe haven currencies – have been able to appreciate in conjunction with the dollar since the start of the month,” said Thu Lan Nguyen, an FX strategist at Commerzbank in Germany.

The dollar index, a measure of its value versus six major peers, was marginally higher at 96.74.

The Swiss franc was up 0.1% at 1.0006.

Trump has vowed to increase U.S. tariffs on $200 billion worth of Chinese imports to 25% from 10% if the two sides cannot reach an agreement.

On Monday morning, when China markets reopened after a one-week holiday break, the dollar was 0.5% higher versus the yuan at 6.7753 while the offshore yuan was relatively unchanged at 6.7808.

Philip Wee, a currency strategist at DBS, expects the yuan to stay at about 6.80 while there is more clarity about the way the trade dispute between the US and China plays out.

The euro was a touch lower versus the greenback at $1.1322 while the Aussie was 0.1% higher at $0.7096, after a disastrous week in which it lost 2.2%.

The euro has been under pressure as the main European government debt yields have reached their lowest levels for the past two years. The only currency lost 2.5% so far this month.

The European Commission on Thursday sharply cut its forecasts for euro area economic growth for this and next year.


Source: Reuters