· The dollar was nudged away from a 13-month peak on Thursday as risk aversion eased and emerging market currencies bounced back on news that a Chinese delegation will travel to the United States late in August to hold trade talks.
The dollar index against a basket of six major currencies .DXY was 0.17 percent lower at 96.536. It pulled back from a 13-month high of 96.984scaled the previous day when currency turmoil in Turkey and concerns about China’s economic health supported safe-haven assets and weighed on emerging market currencies.
China's onshore yuan, which has been rough barometer of risk sentiment, was 0.35 percent firmer at 6.911 to the dollar CNY=CFXS and off a 15-month low of 6.934 set on Wednesday.
As the dollar sagged, the euro rose 0.25 percent to $1.1373 EUR= after plumbing a near 14-month trough of $1.1301 on Wednesday. Concerns that European banks would be hit by financial turmoil in Turkey had weighed on the single currency.
The pound edged up 0.15 percent to $1.2715 GBP=D3, crawling away from a 13-month low of $1.2662 brushed on Wednesday when the dollar's broad strength offset an unexpected drop in Britain's unemployment rate.
The yen, another perceived safe haven which had been on a bullish footing along with the dollar, retreated.
· The Turkish lira eased slightly but remained below 6.0 against the dollar on Thursday after the United States ruled out removing steel tariffs on Turkey even if Ankara frees a U.S. pastor, and after Qatar pledged $15 billion in investment to Turkey.
The lira TRYTOM=D3, which has weakened 36 percent against the dollar this year, eased to 5.98 against the dollar by 0443 GMT from a close of 5.95, as investors weighed up the latest comments from the United States.
· The Treasury Department announced new actions Wednesday directed at Chinese and Russian companies that the department said have facilitated illicit shipments on behalf of North Korea.
The department announced designations against one individual and three companies. Those businesses include a Chinese logistics company and its affiliate in Singapore, as well as Russia-based Profinet and its director general.
· "If you have a situation where tariffs have a significant enough knock-on effect and real growth is impacted in a sustainable way, it's a prescription for them to [follow a] shallower path for the funds rate," said Jacob Oubina, senior U.S. economist at RBC Capital Markets.
As things stand now, the Fed has indicated it plans to hike its benchmark funds rate twice more this year, with the market pricing in moves in September and December. In addition, officials have indicated that three more hikes could be on tap in 2019.
"If the U.S. dollar is going to keep going up, I think the Fed will have to stop raising rates," said Jim Paulsen, chief investment strategist at the Leuthold Group. "I also wonder if we're getting close to two things that might force Trump's hand a bit to water this down. One is the midterms are coming up and [the trade war is] going to become a bigger and bigger issue for Trump, even from his own party.
"And if the economy starts to slow down, particularly the housing data, and that broadens out, I think that will bring a lot of pressure to bear on this trade war strategy," he added.
"The tariff situation is nothing that's sustainable, it's not something that's long lasting," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "I don't think the Fed is going to respond to tariffs that may not last."
· The United States on Wednesday ruled out removing steel tariffs that have contributed to a currency crisis in Turkey even if Ankara frees a U.S. pastor, as Qatar pledged $15 billion in investment to Turkey, supporting a rise in the Turkish lira.
· From here, a dull offering of economic data is likely to keep sentiment front and center. Risk appetite is on the mend in Asia Pacific hours amid hopes for a breakthrough in US/China trade relations. That follows news that China’s Vice Commerce Minister will travel to the US for high-level talks in late August.
Futures tracking the FTSE 100 and S&P 500 are pointing decidedly higher before London and New York come online, hinting the chipper mood has scope for follow-through. Commodity prices may broadly recover in such a scenario as markets unwind at least some of the prior day’s catch-all slump
· China will dispatch Vice Commerce Minister Wang Shouwen to the U.S. for low-level trade talks in late August, the first official exchanges since earlier negotiations broke down two months ago.
The Chinese delegation led by Wang will meet with an American group led by David Malpass, under secretary for international affairs at the Department of the Treasury, at the invitation of the U.S., China’s Ministry of Commerce said in a statement on its website on Thursday.
· China almost quadrupled the value of fixed-asset investment projects approved in July as Beijing looks to accelerate infrastructure spending to boost the cooling economy.
China gave the greenlight to 17 fixed-asset investment projects in July, worth a combined 77.69 billion yuan ($11.24 billion), Zhao Chenxi, an official at the National Development and Reform Commision (NDRC), told reporters on Thursday.
That compared with approvals for 20.8 billion yuan of spending in June, Reuters calculated from official data.
· Turkey is ready to discuss its ongoing issues with the United States as long as there are no threats, Foreign Minister Mevlut Cavusoglu said on Wednesday, amid a widening dispute between the NATO allies that has sent the Turkish currency plunging.
· Oil prices on Thursday clawed back some of the previous day’s losses after Beijing said it would send a delegation to Washington to try to resolve a trade dispute between the United States and China that has roiled global markets.
Market sentiment, though, remains bearish amid the dispute and concerns of an economic slowdown in emerging markets.
Brent crude oil futures LCOc1 were at $71.11 per barrel at 0712 GMT, up 35 cents, or 0.5 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 15 cents, or 0.2 percent, at $65.17 a barrel, held back somewhat by rising U.S. crude production and storage levels.
· Crude oil prices accelerated lower, with sellers now eyeing support in the 63.96-64.26 area. A daily close below that sees the next downside barrier at 61.84. Alternatively, a reversal back above the upper layer of support-turned-resistance set from early February – now at 68.42 - exposes the 69.89-70.41 zone.
Reference: Reuters, DailyFX
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