· The dollar fell against the yen on Tuesday as receding hopes for a preliminary trade deal between the United States and China hurt demand for the greenback.
The yuan touched a two-week low versus the greenback amid doubts about the U.S.-China trade war.
The Australian dollar also fell after minutes from a Reserve Bank of Australia policy meeting showed central bankers considered cutting rates this month.
There have been high expectations that the United States and China would sign a so-called “phase one” deal this month to scale back their 16-month long trade war.
But the dollar took a hit on Monday after CNBC reported that China is pessimistic about agreeing to a deal, which suggests a resolution to perhaps the biggest risk to the global economy remains elusive.
· The dollar fell 0.11% to 108.55 yen, following a 0.09% decline on Monday.
The dollar was quoted at $1.1067 per euro on Tuesday in Asia after falling to the lowest in almost two weeks.
Against a basket of six major currencies, the dollar index stood at 97.856, close to a two-week low.
The yield on 10-year Treasury notes fell slightly to 1.8049% in Asia, also approaching a two-week low as uncertainty boosted demand for the safety of government debt.
Citing a government source, CNBC reported on Monday that Beijing was pessimistic about a trade deal with the United States, troubled by Trump’s comments that there was no agreement on phasing out tariffs.
In the onshore market, the yuan fell to a two-week low of 7.0295 per dollar.
· Currency traders were also wary of the dollar after Trump met U.S. Federal Reserve Chairman Jerome Powell on Monday amid the U.S. president’s repeated criticism that the Fed has not lowered interest rates enough.
“Everything was discussed including interest rates, negative interest, low inflation, easing, Dollar strength & its effect on manufacturing, trade with China, E.U. & others, etc.,” Trump tweeted soon after the meeting, calling the session “good & cordial.”
In a statement, the Fed said Powell’s expectations for future policy were not discussed, but Trump has for more than a year said the Fed was undermining his economic policies by keeping interest rates too high.
· The RBA decided to hold steady, in part because of worries that further easing would harm savers and confidence.
The central bank has already cut rates three times since June to an historic low.
The Aussie took a hit last week after data showed Australian employment suffered its sharpest fall in three years in October, underlining the need for stimulus.
· USD/JPY faces rejection once again near 108.70
USD/JPY is back in the red near 108.60, having faced rejection once at the 108.70 level, as the US dollar paused its broad-based recovery on US President Trump's latest tweet on the Fed rates. Meanwhile, US-China trade deal doubts continue to weigh on the spot.
As or the technical outlook, Valeria Bednarik, the Chief Analyst at FXStret, explained that USD/JPY faced pressure and, unable to hold above the 200-day simple moving average, dropped from a daily peak of 109.07 to a low of 108.50:
"The technical picture remains neutral, with the pair trading within its recent range and indicators flat in the 4-hour chart. In the daily chart, USD/JPY consolidates between the 100-day SMA, offering dynamic support at 107.70, and the 200-day SMA acting as resistance at 109.00. The pair would need a break of either side of this range to determine a longer-term bias.
On the upside, a breakout of 109.00 could lift the pair towards the 109.50 zone, ahead of the more significant area of 109.70-90, where the 100- and 200-week SMA offer strong resistance. On the downside, immediate support stands at last week’s low of 108.23, followed by the 108.00 psychological level."
· Former White House chief economic advisor Gary Cohn said Monday that he believes President Donald Trump will go forward with the Dec. 15 tariffs if the U.S. and China haven’t agreed to a trade deal.
“I think he thinks that that’s a forcing function and if he keeps blinking, he loses credibility in the Chinese eyes,” Cohn said on “Fast Money.”
Treasury Secretary Steven Mnuchin has also said he expects the mid-December round of tariffs on Chinese goods if there’s no deal.
· A “phase one” trade deal between the U.S. and China could be finalized and signed before Christmas this year, according to an executive from bond investment giant Pimco.
“There are obviously issues remaining about agricultural purchase targets, forced technology (transfer) and broader enforcement issues. But I think the view would be to try to resolve something ... by the beginning of December and sign it before Christmas,” he told CNBC’s Geoff Cutmore at the East Tech West conference in the Nansha district of Guangzhou city, China.
“And I think Trump sees this as important. He’s gotten a lot of endorsement from American CEOs who want to see some type of stabilization and anchor in this broader relationship and trade dialogue between China and America,” he added.
· Japan’s lower house of parliament approved on Tuesday a limited trade deal Prime Minister Shinzo Abe agreed with the United States, clearing the way for tariff cuts next year on items including U.S. farm goods and Japanese machine tools.
But there is uncertainty over how much progress Japan can make in negotiating the elimination of U.S. tariffs on its cars and car parts, casting doubt on Abe’s assurances the deal he signed with U.S. President Donald Trump was “win-win”.
The government’s proposal to ratify the trade deal will next be brought to the upper house for a vote but its passage in the powerful lower house increases the chances it will come into force in January.
· The trade war’s drag on the world’s largest two economies will gradually fade in 2020 as tariffs on imports from China have likely peaked, according to Goldman Sachs Group Inc.
The recent progress toward a partial trade deal and expectations of an extended truce implies that this drag will disappear, which will also benefit the global economy, Goldman Sachs economists led by Jan Hatzius wrote in a note dated Nov. 18. This assumes there is no further escalation of tariffs.
· When President Trump’s advisers suggested that Beijing resume buying around $20 billion in American farm products as part of a trade deal, Mr. Trump wasn’t satisfied. In a dramatic public retelling in the Cabinet Room, he said he pressed his team to more than triple that figure, then trimmed that a little and asked for up to $50 billion in annual purchases.
“My people had $20 billion done,” Mr. Trump recounted in an Oct. 21 cabinet meeting. “And I said, ‘I want more.’ They said, ‘The farmers can’t handle it.’ I said, ‘Tell them to buy larger tractors. It’s very simple.’” The cabinet members gathered around Mr. Trump laughed.
· Passenger car registrations in Europe rose 8.6% in October, to their highest level since 2009, driven by robust demand in Germany and France and a rebound in demand for Volkswagen (VOWG_p.DE) which posted a 29% gain.
Registrations rose to 1.214 million cars in the countries of the European Union and the European Free Trade Agreement (EFTA), statistics published by the European Auto industry association ACEA on Tuesday showed.
· In the view of Robert Carnell, Chief Economist Head of Research, Asia-Pacific at ING Bank, a lack of progress on the US-China trade front is serving as good news for the US equity markets.
Key Quotes:
“With the clock ticking until the Schedule 4B list of additional tariffs due on December 15 is implemented, there doesn't seem to be much progress on an elusive trade deal. The S&P 500 is grinding ever higher though. Bond markets are treading water. USDCNY is flattish to a little higher.
it is interesting how currently, despite rumors that the trade talks are having problems getting over the line for a phase-one deal, stocks are still rising, and indicators of risk sentiment remain broadly positive.
The clock is ticking though. There are about 25/26 days until the tariffs on this list are imposed - smack-bang in the middle of the gift-giving season in the US. I wonder if markets will get a
· Hong Kong’s embattled leader Carrie Lam said on Tuesday she hoped a standoff between police and a hold-out group of anti-government protesters at a university could be resolved and she had told police to handle it humanely.
A last group of about 100 defiant protesters remained in the Hong Kong Polytechnic University, which has been surrounded by police, after more than two days of clashes in which more than 200 people have been injured.
· Oil futures gained nearly 2% on Friday as comments from a top U.S. official raised optimism for a U.S.-China trade deal, but worries about increasing crude supplies capped prices.
Brent crude gained $1.02, or 1.6%, to settle at $63.30 a barrel, while West Texas Intermediate crude rose 95 cents, or 1.7%, to settle at $57.72 a barrel.
Both benchmarks posted their second straight weekly gain. Brent rose 1.3%, and WTI gained 0.8%.
U.S. Commerce Secretary Wilbur Ross said in an interview on Fox Business Network that there was a very high probability the United States would reach a final agreement on a phase one trade deal with China.
Reference: Reuters,CNBC,FX Street, Bloomberg,New York Times
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