Yen slips on China-U.S. deal hopes, trade-linked currencies rise

[November 15, 2019]   By Elizabeth Howcroft

(Reuters) - Optimism that the United States and China may soon end their trade war after White House economic advisor Larry Kudlow said a deal was "getting close" lifted trade-exposed currencies on Friday at the expense of safe-haven assets such as the yen.

A U.S. five dollar note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration

Given the lack of concrete detail in Kudlow's comments, however, markets stayed mostly cautious.

"To be blunt, such rhetoric is more or less the same as Steven Mnuchin (who) said months ago that a deal was "99% done"," Commerzbank analysts wrote in a note to clients, though they acknowledged the comments had benefited sentiment.

They said the comments could not be taken seriously until the trade documents could be assessed and a deal was signed.

The dollar rose 0.3% versus the yen, last at 108.730, suggesting an end to the past week's dollar-yen slump may be in sight <JPY=EBS>. The Swiss franc also weakened 0.1% versus the dollar <CHF=EBS>.

The New Zealand and Australian dollars firmed slightly on the news, the latter rising off four-week lows <NZD=D3> <AUD=D3>.

While China's commerce ministry said the two countries were holding "in-depth" discussions and U.S. President Donald Trump said on Tuesday a deal was close, the Financial Times, citing sources, said an agreement may not be reached in time to avoid a new round of U.S. tariffs taking effect on Dec. 15.

The U.S. commerce secretary said that Trump has not indicated any change on the Dec. 15 tariffs, that there will be another trade call with China on Friday and that there is a "very high probability" that a trade deal will be reached.

The Norwegian crown strengthened around 0.6% versus the dollar <NOK=D3> and 0.4% versus the euro <EURNOK=D3> while the Swedish crown tracked these gains but to a lesser extent <SEK=D3> <EURSEK=D3>. The yuan firmed modestly to the dollar but was still set to snap a six-week winning streak against the dollar <CNH=EBS>.

The Swiss franc - which fell below the 1.09 threshold on Thursday when risk aversion gripped markets - recovered to trade at 1.09185 per euro, up 0.2% on the day <EURCHF=EBS>.

The euro is set for its biggest weekly fall against the franc since early August, raising speculation the Swiss National Bank has stepped back from its interventionist policy but the central bank reiterated on Thursday its willingness to intervene to stop the currency strengthening too much.

Euro zone headline inflation slowed in October, in line with estimates, data released on Friday showed. The euro was last up 0.1% versus the dollar <EUR=EBS>.

(Reporting by Elizabeth Howcroft; Editing by Jacqueline Wong)

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