November 5, 2019 / 8:05 PM / 2 months ago

FOREX-Safe-haven yen, Swiss franc slide as U.S.-China nears trade deal

    * China pushes U.S. to roll back some tariffs
    * China pares lending rates by 5 basis points
    * Chinese yuan holds gains vs U.S. dollar even after rate cut
    * Aussie dollar rises vs dollar as risk appetite rises
    * Graphic: World FX rates in 2019

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 5 (Reuters) - The safe-haven yen and Swiss franc slid against the dollar on Tuesday as
growing signs the United States and China are inching closer to a trade deal boosted risk appetite and
spurred investors to seek higher-yielding currencies.
    Gains against the yen and Swiss franc pushed the dollar index to a three-week high, tracking the rise
in benchmark U.S. 10-year Treasury yields. Trade-oriented currencies such as the Australian dollar surged
as well, with the Chinese currency climbing to a three-month high against the greenback. 
    A decision by the Chinese central bank to trim lending rates by only 5 basis points also increased
overall risk-taking.
    China is pushing U.S. President Donald Trump to remove more tariffs imposed in September as part of a
"phase one" U.S.-China trade deal, which is expected to be signed later this month, people familiar with
the negotiations said.
    "Growing trade deal optimism continues to be the driver behind rising U.S. 10-year yields this week
and we think this morning’s move above 1.83% is getting the fund longs excited about a breakout move
higher into the 109s (in dollar/yen)," said Erik Bregar, head of FX strategy at Exchange Bank of Canada in
    In afternoon trading, the U.S. dollar rose 0.6% against the yen to 109.21 yen, and was up 0.6%
versus the Swiss franc at 0.9935.
    The yen and Swiss franc tend to strengthen in times of geopolitical tension and financial stress.
    The dollar index gained 0.5% to 97.969.
    The yuan traded in the offshore market jumped to its strongest level since Aug. 5 at 6.9838.
The onshore yuan also posted its strongest close since Aug. 2..
    The currency held its gains even after China's central bank cut its one-year medium-term lending
facility (MLF) rate for the first time since early 2016, though it opted for a 5 bps cut, which
Commerzbank called "tiny."
    China and the United States have imposed tariffs on each other's goods in a trade war that has dragged
on for 16 months and raised the specter of a global recession.
    Kit Juckes, head of FX strategy at Société Générale, said the agreement would probably mark a truce
rather than peace but added that "the chance of getting a first-stage deal seems to be quite good."
    The optimism spilled over into other currencies, with the Australian dollar close to recent
three-month peaks and the highest versus the yen since the end of July. 
    The euro, however, was down 0.4% against the dollar at $1.1091.
    Societe Generale's Juckes said the euro would be one of the last currencies to benefit from improved
risk sentiment, noting that Monday's data showing Polish manufacturing activity in its sharpest downturn
in 10 years had taken the wind out of the euro. 
    Central European states such as Poland are a key market and investment destination for euro zone
    Currency bid prices at 2:55PM (1955 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1066        $1.1126     -0.54%         -3.51%      +1.1140     +1.1064
 Dollar/Yen       JPY=        109.2000       108.5600    +0.59%         -0.96%      +109.2300   +108.5700
 Euro/Yen         EURJPY=     120.85         120.81      +0.03%         -4.25%      +121.2900   +120.7100
 Dollar/Swiss     CHF=        0.9935         0.9876      +0.60%         +1.23%      +0.9936     +0.9877
 Sterling/Dollar  GBP=        1.2883         1.2882      +0.01%         +0.99%      +1.2916     +1.2860
 Dollar/Canadian  CAD=        1.3152         1.3149      +0.02%         -3.56%      +1.3178     +1.3112
 Australian/Doll  AUD=        0.6891         0.6883      +0.12%         -2.24%      +0.6928     +0.6877
 Euro/Swiss       EURCHF=     1.0993         1.0990      +0.03%         -2.32%      +1.1029     +1.0980
 Euro/Sterling    EURGBP=     0.8589         0.8636      -0.54%         -4.40%      +0.8645     +0.8585
 NZ               NZD=        0.6380         0.6401      -0.33%         -5.02%      +0.6431     +0.6372
 Dollar/Norway    NOK=        9.1871         9.1447      +0.46%         +6.35%      +9.2002     +9.1036
 Euro/Norway      EURNOK=     10.1670        10.1760     -0.09%         +2.63%      +10.1849    +10.1348
 Dollar/Sweden    SEK=        9.6645         9.6222      -0.10%         +7.82%      +9.6732     +9.5841
 Euro/Sweden      EURSEK=     10.6972        10.7076     -0.10%         +4.22%      +10.7118    +10.6720
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Elizabeth Howcroft in London; Editing by
Dan Grebler)
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