Home Forex Strategy Dollar holds gains as investors cling to trade hopes – CNBC

Dollar holds gains as investors cling to trade hopes – CNBC

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A stack of British one pound sterling coins stand in front of a British Union flag in this arranged photograph in the United Kingdom, on June 13, 2016.

Jason Alden | Bloomberg via Getty Images

The dollar clung to most of its recent gains on Wednesday after U.S. President Donald Trump said a trade deal with China was “close” but offered no new details on negotiations to send the greenback higher.

Hopes for an imminent a deal to wind back tit-for-tat tariffs the world’s two largest economies have imposed on each other have lifted the dollar 1% this week to a one-month high of 98.423 overnight against a basket of currencies.

It slipped a little lower to 98.309, though moves were modest as investors waited for more concrete trade news.

Antipodean currencies trod water ahead of a central bank rate-setting decision in New Zealand and after data showed Australian wages growth further slowed, as expected, in the third quarter.  

Trump’s overnight speech at the Economic Club of New York reprised well-worn criticism of the U.S. Federal Reserve for failing to cut interest rates deeply enough and rhetoric about China’s “cheating” on trade. 

However he did say a deal “could happen soon,” which was enough keep the dollar from slipping.

“(It) was heavy on rhetoric and light on detail, leaving markets none the wiser,” National Australia Bank’s senior FX strategist Rodrigo Catril said in a note.

The dollar hit a month-high against the euro overnight and steadied near that level at $1.012 on Wednesday.

China’s yuan weakened past the 7-per-dollar mark after the speech and was steady at 7.0232 per dollar in offshore trade on Wednesday.

Against the Japanese yen the dollar was stable at 108.97 yen – not far below the 5 1/2 month high of 109.48 yen it hit last week.

The British pound was steady at $1.2850, after a brief boost from the Brexit Party’s decision not to contest Conservative-held seats at December’s election faded.

The Australian dollar sat at $0.6842, close by a two-week trough.

The New Zealand dollar, which fell to near a month-low on Tuesday after a soft survey on inflation expectations, edged up slightly to $0.6335 ahead of the Reserve Bank of New Zealand (RBNZ) interest rate-decision at 0100 GMT.

Futures markets have priced in a 75% chance of a rate cut.

“A cut on its own probably wouldn’t do to much to the market, but if you got an ‘on-hold,’ that would be a very big reaction upwards in the kiwi,” said Imre Speizer, head of New Zealand strategy at Westpac Bank in Auckland.

“To get a downwards reaction, I think they’ve got to cut and then signal clearly further cuts to come.”

Later on Wednesday, Fed Chairman Jerome Powell is due to testify on the U.S. economic outlook before the congressional Joint Economic Committee at 1600 GMT.

The first public hearings in Trump’s impeachment inquiry begin an hour earlier at 1500 GMT.

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