· The dollar held the upper hand against its rivals on Wednesday, particularly versus traditional safe-haven currencies, on rising hopes for a U.S.-China trade deal and a string of solid U.S. economic data.
The dollar index against major currencies was at 97.936, after rising 0.37% on Tuesday to 97.912.
Against the yen, the dollar traded at 109.16 yen, down 0.01% from late U.S. levels but near its October high of 109.285 and a three-month high of 109.25 hit on Oct. 30.
The euro stood at $1.1075, having dropped 0.49% on Tuesday and was not far from a near three-week low of $1.10635 hit in U.S. trade. Hopes that the Trump administration could roll back some of tariffs it has imposed on goods from China as a part of a “phase one” U.S.-China trade deal boosted risk sentiment in financial markets.
A survey on the vast U.S. service sector published on Tuesday showed the business sentiment has improved in October from a three-year low in September.
The ISM non-manufacturing sector index rose to 54.7 from 52.6 in September, beating market expectations.
The rebound is a welcome sign for dollar bulls as a fall in the index would have suggested that malaise in trade war-hit manufacturers was infecting the service sector, too.
The offshore yuan traded at 7.0005 yuan per dollar, after having risen to three-month high of 6.9867 to the dollar on Tuesday on rising trade deal hopes.
The currency has gained 2.8 percent from its record low in the offshore trade marked in early September.
· The 10-year Treasury note yield TMUBMUSD10Y, -1.10% surged 7.8 basis points to 1.865%, its highest since Sept. 13, while the two-year note rate TMUBMUSD02Y, -0.73% was up 3.8 basis points to 1.633%. The 30-year bond yield TMUBMUSD30Y, -0.79% climbed 7.4 basis points to 2.348%, marking its biggest one-day climb since Sept. 25.
The Wall Street Journal and other media said the White House was considering rolling back some existing tariffs on $111 billion of Chinese imports that had been imposed on Sept. 1 in order to finalize the so-called “phase one” deal. Originally, the deal was only expected to prevent the imposition of additional tariffs set to kick in at mid-December.
· U.S. President Donald Trump’s suggestion that he could sign a trade deal with Chinese President Xi Jinping in Iowa has set off a flurry of excitement in Muscatine, Iowa, a city on the banks of the Mississippi River that has hosted Xi twice since 1985.
· There may be winners and losers from a political point of view when it comes to the trade war between the U.S. and China. But the latest data shows that economically, both sides are losers. And they can help explain why there is more talk of a deal: Losses are mounting into the tens of billions of dollars for the U.S. and China.
Politically, President Donald Trump can boast that China has lost far more than the U.S. in dollar terms. Compared with the first nine months of last year, trade data released Tuesday showed U.S. imports from China have fallen a sharp $53 billion. U.S. exports to China are down just $14.5 billion.
But the U.S. exports much less to China than it imports. So even the much smaller drop is a bigger percentage fall.
In the first nine months of the year, U.S. exports to China are down 15.5% compared with the same period a year ago, a bigger drop than the 13.5% fall for Chinese imports.
The danger is if Chinese customers have already found new suppliers, meaning lasting damage has been done to U.S. exporters.
· Private equity billionaire David Rubenstein told CNBC on Tuesday that he believes the U.S. and China will be able to complete the “phase one” trade deal that was reached in principle last month.
″‘Phase one’ is not everything, but it’s enough to get people feeling that this is not a big issue for the economy for the next year or so,” said the co-founder and co-executive chairman of The Carlyle Group, which has $222 billion of assets under management.
· President Donald Trump on Tuesday said that the United States is willing to help Mexico “wage WAR on the drug cartels” in the country, following the deaths of at least nine Americans, including six children, who reportedly came under attack in a highway ambush in a Mexican border state Monday.
Asked Tuesday morning if Mexico would accept U.S. help on this security issue, President Manuel Lopez Obrador said that he doesn’t believe his country will need foreign intervention to deal with such cases, Reuters reports.
· British Prime Minister Boris Johnson will formally announce a Dec. 12 election on Wednesday, urging voters to back him and promising to “get Brexit done in the next few weeks”.
The outcome of the vote is hard to predict, with the immediate question of Britain’s exit from the European Union scrambling voters’ traditional loyalties and giving smaller rivals a chance to challenge the two biggest parties, Johnson’s Conservatives and the left-of-centre Labour Party.
· Oil prices rose more than 1% on Tuesday on hopes for a U.S.-China trade agreement and optimism that Washington could roll back some of the tariffs it has imposed on Chinese imports.
Brent crude futures gained 84 cents to settle at $62.94 a barrel. U.S. crude futures gained 69 cents, or 1.22%, to settle at $57.23 a barrel.
China is pushing U.S. President Donald Trump to remove more tariffs imposed in September as part of a so-called Phase 1 deal, which would help to ease the broad economic damage inflicted by the trade dispute between the world’s two biggest oil consumers.
Reference: CNBC, Reuters, Market Watch
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