Dollar strengthens as relief over U.S.-Mexico trade deal
dissipates
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[August 29, 2018]
By Tom Finn
LONDON (Reuters) - The dollar rose on
Wednesday as relief about a U.S.-Mexico trade deal gave way to concern
among investors that the conflict over trade between the U.S. and China
was not about to end soon.
The U.S currency had dipped to a four-week low overnight as investors
unwound safe-haven bets on the currency after the United States and
Mexico agreed on Monday to overhaul NAFTA.
The U.S. currency has fallen for three consecutive weeks, even though
the United States was raising interest rates faster than other major
economies.
That is partly because of political uncertainty in the U.S. - criminal
convictions were brought against of one of President Donald Trump's
ex-advisors last week - and comments by the Federal Reserve that seemed
to suggest a slower pace of U.S. rate increases.
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On Wednesday, though, the dollar index gained and at 1045 GMT was up 0.1
percent at 94.826 <.DXY>. It traded as low as 94.434 during the previous
session, its lowest since July 31.
"This deal [with Mexico] was more about making progress before the
mid-term elections in the United States," said MUFG currency strategist
Lee Hardman.
"The real fight is likely still ahead and it will not be long before
investor attention shifts back to the more concerning conflict with
China," he added.
The deadline for public comment on U.S. President Donald Trump's tariffs
on another $200 billion of Chinese goods is on Sept. 5, with the new
measures possibly taking effect later that month.
Elsewhere, the Swedish crown edged down toward a nine-year low versus
the euro of 10.721 hit on Tuesday over uncertainty about next week's
election and signals that interest rates won't rise until 2019 <EURSEK=D3>.
AUSSIE HIT
"Low underlying inflation is putting question marks on Riksbank rate
hikes and political risks ahead of the election are lowering the crown,"
said Lina Fransson, a fixed income strategist at SEB.
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![](../images/082918pics/busine43.jpg)
Bundles of banknotes of U.S. Dollar are pictured at a currency
exchange shop in Ciudad Juarez, Mexico January 15, 2018.
REUTERS/Jose Luis Gonzalez/File Photo
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Along with the Turkish lira and the Brazilian real, the Swedish crown has been
one of the worst-performing currencies in 2018.
Its slide appeared to galvanize a similar move in the Norwegian crown which fell
on Wednesday toward 9.7790 against the euro, its weakest level since February. <EURNOK=D3>
The euro <EUR=EBS>, meanwhile, fell 0.2 percent to $1.1663, as worries mounted
that Italy's public deficit could exceed the European Union's ceiling of 3
percent of gross domestic product.
It has risen against the dollar during the previous three sessions.
The Australian dollar was the weakest of the major currencies on Wednesday <AUD=D3>
and fell about half a percent to $0.7298.
That was prompted by Australia's Westpac Banking Corp raising its key mortgage
rates in an effort to preserve its profit margins amid higher wholesale funding
costs.
The Australian dollar was knocked lower as traders wagered the Reserve Bank of
Australia might be forced to keep policy stimulatory for longer in the face of a
de-facto tightening in the market.
China's offshore yuan <CNH=D3> was down 0.4 percent at 6.8280 yuan per dollar,
after the central bank announced fresh steps on Friday to stabilize the
currency.
"Were we to see an escalation - with Washington following through with their
threat of 25 percent tariffs on 200 billion dollars of Chinese imports - then we
would expect another bout of yuan weakness as the currency adjusts to a weaker
Chinese economic outlook," said Viraj Patel, a currency analysts with ING in
London.
(Editing by Larry King)
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