SINGAPORE,. The US dollar rose versus its major peers today, as investors sought shelter in safe haven currencies as fears of a global growth slowdown and US-Sino trade tensions sapped risk appetite.
The greenback and the yen, both considered safe haven currencies advanced as traders fear that last week’s capitulation in oil prices suggests that the global economic recovery is losing steam.
The British pound changed hands at US$1.2819, gaining 0.05 per cent versus the dollar. European Union leaders sealed a Brexit pact yesterday calling it the “best possible” deal that Britain could have got.
A vote in the British parliament vote is expected to take place just before the next EU summit on December 13-14. Most analysts expect sterling to be subdued till then.
With Brexit settled for now, currency traders are looking to the upcoming G20 meeting in Buenos Aires on November 30, where President Trump and President Xi are likely to discuss trade.
Investors are hoping a workable deal can out of the summit because if not, Washington’s 10 per cent tariff rate on US$200 billion (RM838.4 billion) of Chinese imports will rise by early next year to 25 per cent.
Trump has threatened to impose tariffs on all remaining Chinese imports — about US$267 billion more in goods — if Beijing fails to address US demands.
“If there is some sort of truce which comes out of this deal, we will see money coming out of the safe haven US dollar,” added Catril.
“This would bode well for the riskier currencies such as the Aussie, kiwi dollar and the Asian emerging market currencies.”
The yen traded with a strong bias in early Asian trade today. The Japanese currency traded within a very tight range of less than 100 pips last week.
The US dollar is expected to remain in an uptrend against the yen, with the Fed on a monetary tightening path while the Bank of Japan remains committed to its ultra-loose monetary policy due to low growth and inflation.
This interest rate differential between US and Japanese bonds makes the US dollar a more attractive bet than the yen.
Analysts also believe another factor supporting the dollar is Japanese investors remaining heavily invested in US and other foreign assets.
The euro traded marginally lower at US$1.1335. The single currency lost 0.7 per cent versus the greenback last week as traders reacted to weak economic data out of the common area.
The ongoing tussle between Rome and Brussels over Italy’s free-spending budget, which breaks the European Commission’s fiscal rules, has also put the euro under pressure.
However, Italian Deputy Prime Minister Matteo Salvini hinted yesterday at the possibility of tweaking the country’s deficit goal for next year, a move that could open a negotiation between Rome and Brussels to avoid a disciplinary procedure against Italy.
There will be increased focus on ECB President Draghi’s appearance at the European parliament today, with markets expecting to take dovish tone given the weakness in recent economic data.
“The ECB’s quantitative easing programme is set to finish up next month and we think the hurdle to extend the programme is exceptionally high,” said Nick Smyth, interest rate strategist at BNZ Markets in a note.
The New Zealand dollar lost 0.3 per cent to trade at US$0.6760 as investors took in weaker-than-expected retail sales data. — Reuters