FX Market: Yen Gains as U.S Charges China’s Huawei
FX MARKET – On Tuesday, the Japanese Yen rose in Asia on safe-haven appeal. Meanwhile, the U.S Justice Department announced charges against China’s Huawei Technologies Co Ltd with fraud.
The move could complicate high-level trade talks set to begin on Wednesday when China’s Vice Premier Liu He will meet with U.S. Trade Representative Robert Lighthizer.
“There is a much lesser chance now that we get anything positive out of these trade negotiations,” said Nick Twidale, Chief Operating Officer at Rakuten Securities in a Reuters report.
“This is likely to be bad for risky assets such as stocks, and we expect the dollar/yen and Australian dollar to be under pressure,” Twidale added.
By 11:18 PM ET (04:18 GMT), the USD/JPY pair edged up 0.1% at 109.30. But, the news did not affect the Chinese Yuan since the USD/CNY pair traded near flat at 6.7434.
The USD index that tracks the greenback against a basket of other currencies had little change at $95.40. Traders remained vigilant ahead on the Fed’s two-day meeting.
Many Fed observers expect the U.S Central Bank to remain firm on interest rates on Wednesday. They also hope the central bank will advocate for a more dovish stance on monetary policy.
Investor attention will focus on Fed Chairman Jerome Powell’s news conference following the release of the Fed’s decision.
On Friday, the Wall Street Journal reported that the central bank is close to halting its balance sheet trimming program. Investors will focus on the central bank’s ongoing balance sheet reduction program.
Meanwhile, the National Australia Bank’s business conditions index fell from 11 in November to 2 in December. The long-term average is 6.
FX Market: Dollar rose slightly Vs. Euro, Pound as investors eye Fed, China talks
On Monday, the USD rose slightly against Euro in early trading in Europe. The rise came after a gloomy survey from the respected Germany research institute Ifo.
According to the report, expectations in the euro zone’s largest economy flopped in January. The drop came less than a week after its widely-followed business confidence index for Germany fell to its lowest in 2.5 years.
“December’s ray of hope in the automotive industry has vanished at the beginning of the year,” Ifo said in a press release.
Also, according to the European Central Bank, the private sector loan growth rate in the euro zone stayed at 3.3% in December. Investors expected a slight rise.
The shutdown forced the Fed Reserve, and the ECB to be more cautious. Since then, the dollar is yet to show a clear trend against the euro this year. On Friday the dollar fell after the announcement of measures to reopen the U.S federal government. The decision encouraged more traders to take on more risk.
At 04:10AM ET (09:10GMT) the euro fell 0.1% against the USD at $1.1408. On Friday the dollar index, a gauge of its value versus six major peers was marginally lower at 95.74, after falling 0.8%.
GBP/USD was down 0.2% at $1.3177 against the dollar and down 0.1% against the euro at 1.1551.
In Asian markets earlier, a rally in the Yuan also fueled a bounce in the Australian dollar, which gained 0.18% versus the dollar to $0.7195.
The Kiwi dollar strengthened by 0.3% to $0.6859.
The USD/JPY added 0.2% in early Asian trade at 109.34.