July 3, 2018 / 6:22 PM / 8 months ago

FOREX-Dollar slides as risk appetite picks up ahead of U.S. holiday

    * Chinese central bank to keep yuan stable
    * Currency markets relieved with Australian dollar leading
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Adds comment, updates prices in text, table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 3 (Reuters) - The dollar fell on Tuesday in
thin pre-holiday trading, as investors consolidated recent gains
and focused less on trade tensions, raising the market's risk
appetite and prompting some flows into other currencies such as
the euro and Australian dollar.
    Ahead of the U.S. Independence Day holiday on Wednesday,
market sentiment also improved after the Chinese central bank
moved to calm currency markets following a fall in the renminbi
below a key psychological level.
    In a statement on the website of the People's Bank of China,
Governor Yi Gang said the central bank was closely watching
fluctuations in the foreign exchange market and would seek to
keep the yuan at a stable and reasonable level.
    "That sentiment may have helped risk appetite a little...but
the U.S. July 4th holiday and the July 6th start of U.S.-China
trade tariffs are serving to keep FX investors on the sidelines
for now," Shaun Osborne, chief FX strategist at Scotiabank in
Toronto, said.  
    In China, protracted weakness of its currency raises the
prospects of capital outflows and a slowdown in the world's
second-biggest economy, creating a new source of concern for
currency markets grappling with rising threats to global trade. 
    The PBOC's comments snapped a 10-day losing streak in the
renminbi, falling nearly 4 percent against a trade-weighted
basket and about 4.5 percent against the
dollar over that period. 
    In afternoon trading, the dollar was down 0.4 percent
against a basket of at 94.604, after notching up three
consecutive months of gains. Investors are awaiting the release
of the Federal Reserve's June meeting minutes on Thursday and
Friday's U.S. jobs data for validation of policymakers'
forecasts for two more rate hikes this year.
    Valuations also remain supportive of the dollar, with its
trade-weighted basket still below long-term averages.

    "We do not expect near-term political or monetary policy
outcomes to work against the prevailing U.S. dollar strength 
story," said Shahab Jalinoos, global head of FX strategy, at
Credit Suisse in New York.
    "As for Friday's payrolls data, it would take a large miss
on the average earnings expectation to move the dial, in our
view," he added.
     The euro, meanwhile, rose after Germany's coalition settled
a row over migration that had threatened to topple Chancellor
Angela Merkel's government. The single currency was last up 0.2
percent at $1.1655.
    The Australian dollar, sensitive to developments in
China because it is a key buyer of Australian commodity exports,
were up 0.5 percent at US$0.7376.
    Currency bid prices at 2:09 PM (1809 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1657        $1.1639     +0.15%         -2.84%      +1.1673     +1.1621
 Dollar/Yen       JPY=        110.5700       110.8900    -0.29%         -1.86%      +111.1300   +110.5100
 Euro/Yen         EURJPY=     128.89         129.06      -0.13%         -4.65%      +129.5500   +128.7300
 Dollar/Swiss     CHF=        0.9918         0.9934      -0.16%         +1.78%      +0.9950     +0.9914
 Sterling/Dollar  GBP=        1.3180         1.3141      +0.30%         -2.46%      +1.3206     +1.3115
 Dollar/Canadian  CAD=        1.3153         1.3184      -0.24%         +4.56%      +1.3207     +1.3132
 Australian/Doll  AUD=        0.7379         0.7339      +0.55%         -5.41%      +0.7404     +0.7315
 Euro/Swiss       EURCHF=     1.1561         1.1562      -0.01%         -1.10%      +1.1585     +1.1558
 Euro/Sterling    EURGBP=     0.8844         0.8855      -0.12%         -0.44%      +0.8863     +0.8829
 NZ               NZD=        0.6751         0.6714      +0.55%         -4.74%      +0.6757     +0.6689
 Dollar/Norway    NOK=        8.1290         8.1700      -0.50%         -0.95%      +8.1809     +8.1105
 Euro/Norway      EURNOK=     9.4772         9.5105      -0.35%         -3.77%      +9.5183     +9.4598
 Dollar/Sweden    SEK=        8.8216         8.9640      -1.43%         +7.56%      +8.9795     +8.8176
 Euro/Sweden      EURSEK=     10.2848        10.4340     -1.43%         +4.51%      +10.4420    +10.2790
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci
and Lisa Shumaker)
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