Forex – Dollar Flat as Trade Tensions, Global Growth Fears Weigh


Forex - Dollar Flat as Trade Tensions, Global Growth Fears Weigh – The U.S. dollar was flat against a currency basket on Monday after drifting lower overnight amid worries about trade war tensions and the health of the global economy, while the pound was on the back foot ahead of this week’s Brexit vote.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was little changed at 96.54 by 04:43 AM ET (09:43 AM GMT), after drifting down to 95.78 overnight.

The greenback remained on the defensive after soft U.S. payrolls data fueled speculation that the Federal Reserve may stop raising interest rates after a widely anticipated rate hike next week.

U.S. non-farm payrolls increased by 155,000 jobs last month, below forecast of 200,000 jobs and the wage increase was softer than expected even though its annual rise remained near the highest level in almost a decade.

Some Fed policymakers have struck a cautious tone about the economic outlook, possibly flagging a turning point in its monetary policy.

“The Fed will surely raise rates this month but people were thinking that it could indicate that it won’t be in a hurry to hike them further. Such wariness have grown further after the data,” said Akinori Fukushima, chief manager of forex at Mitsubishi Trust and Banking.

Investors are growingly worried that rising tensions with China could take a toll on the U.S. economy.

Although U.S. President Donald Trump and Chinese President Xi Jinping struck a 90-day truce on tariffs earlier this month, U.S. Trade Representative Robert Lighthizer said on Sunday there is a “hard deadline”, noting U.S.-China trade negotiations need to reach a successful end by March 1.

New tensions between the two countries flared last week after Meng Wanzhou, chief financial officer of China’s tech giant Huawei Technologies was arrested in Vancouver at the request of the United States.

The dollar was little changed against the yen, with USD/JPY last at 112.70.

Data overnight showed that the Japanese economy contracted the most in over four years in the third quarter, adding to signs elsewhere in Asia and Europe of weakening momentum and fueling concerns about the wider impact of the Sino-U.S trade war.

The euro was higher against the U.S. currency, with EUR/USD up 0.33% to 1.1417.

The pound was broadly lower, with GBP/USD down 0.15% at 1.2730 and EUR/GBP adding on 0.27% to trade at 0.8965 ahead of a critical parliamentary vote on Tuesday on whether to accept or reject British Prime Minister Theresa May’s Brexit deal.

The pound touched intra-day highs earlier after the European Court of Justice ruled that Britain can unilaterally revoke Brexit if it wishes to do so.

Meanwhile, data showed that the UK economy grew by just 0.4% in the three months to October, slowing from 0.6% in the previous three month period as Brexit uncertainty weighed.

— Reuters contributed to this report

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