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The U.S. dollar came off slightly versus its rivals on Thursday, as news of renewed U.S.-China trade talks helped risk appetite return to financial markets.
Beijing will send a delegation to Washington later this month, and vice commerce minister Wang Shouwen will meet U.S. Treasury Undersecretary David Malpass to tackle the trade spat between the two economic behemoths. The two countries haven’t met to talk trade since July and the prospect of a trade war, marked by reciprocal tariffs and restrictions, as weighed on market expectations for global growth.
But the prospects of a meeting gave market participants grounds for hope and risk assets, including many emerging market currencies and heavyweights like the Australian dollar AUDUSD, +0.5664% traded stronger on Thursday.
Risk sentiment “has received a boost overnight on two-fronts—reports that China has accepted a U.S. invitation to trade talks in late August and news that Qatar has pledged to invest $15 billion in Turkey are helping market risk sentiment and pressuring the dollar a tad,” wrote Dean Popplewell, vice president of market analysis at Oanda.
China’s yuan was sharply higher against the dollar in offshore trading USDCNH, -1.2337% where the Chinese currency trades more freely. One dollar last bought 6.8720 yuan, down 1.1% from Wednesday, according to FactSet. In Beijing, the buck fetched 6.8935 yuan USDCNY, -0.7484% down 0.6%.
The ICE U.S. Dollar Index DXY, -0.28% was down 0.3% at 96.397, slightly extending its decline after a round of economic data, including a weaker Philadelphia Fed manufacturing index. The gauge had hit a more-than-one-year high Wednesday. The broader WSJ Dollar Index BUXX, -0.35% which also measures the buck against emerging markets currencies, was down 0.4% at 89.93.
Meanwhile, President Donald Trump, who previously had made comments favoring a weak dollar as it would make the U.S. more competitive on the global market, tweeted that investors were flocking to the buck, while also commenting on the strong U.S. economy.
Our Economy is doing better than ever. Money is pouring into our cherished DOLLAR like rarely before, companies earnings are higher than ever, inflation is low & business optimism is higher than it has ever been. For the first time in many decades, we are protecting our workers!
— Donald J. Trump (@realDonaldTrump) August 16, 2018
But while his previous comments pushed the dollar down, Thursday’s tweet did little to help the buck.
Elsewhere, the Turkish lira USDTRY, -3.0634% continued its rebound against its major rivals for a third day in a row, helped by Wednesday’s news that Qatar was said to invest $15 billion in Turkey.
The lira sold off 16% last Friday as problems surrounding Turkey including weak economic fundamentals, an unorthodox approach to monetary policy by the government and trade and diplomatic issues with its major trade partners.
One dollar last bought 5.7610 lira, down 3.3% from Wednesday, according to FactSet, while the euro bought 6.5661 lira, down 3%.
The Institute of International Finance said earlier this week that the dollar-lira pair was at fair value around 5-5.50, based on Turkey’s current-account deficit.
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