US dollar declines as optimism for US-China trade deal weaken
The US dollar declined last Tuesday, with the New Zealand dollar leading increases against the American exchange as a rally in Asian equities fell over into money markets.
Notwithstanding uncertainties that a trade deal will be reached when trade discussions concerning Beijing and Washington recommence this week, marketplace watchers accredited the moves to positioning after a spell of unpredictability last week.
Morten Lund, a senior FX strategist at Nordea stated "We had a lot of market volatility last week, and the current move in the high-beta currencies is due to some unwinding of extreme long positions in the dollar." The newest futures data revealed that hedge funds have added to their massive long dollar positions.
Against a basket of other currencies, the dollar dipped 0.1 per cent to 98.85 after posting its biggest single-day rise in a week in the previous session.
Markets will be looking for comments from US Federal Reserve chairman Jerome Powell later in the day after some weak US data last week raised concerns that the US economy may be heading towards a protracted slowdown.
The euro got a boost from German industrial output, data which unexpectedly rose in August.
The single currency gained 0.2 per cent to US$1.0989 but remained within sight of last week's US$1.08790, its lowest in more than two years.
The Chinese Yuan rose in onshore and offshore trade as Chinese financial markets re-opened after a week-long holiday.
The Australian and New Zealand dollars, which are linked to global trade, edged higher as some investors reduced bearish bets.
Dealers warned that the move could fade depending on the trade talks in Washington.
Deputy-level meetings between US and Chinese trade negotiators began in Washington on Monday, with little immediate signs of progress.