Currency trends Tuesday: Chinese yuan strengthens after Xi-Trump trade talks

China yuan coins

Asian currencies, particularly China’s yuan, were stronger on Tuesday amid optimism that a verbal trade agreement between the U.S. and China will spur the Trump administration to at least stop escalating its trade war.

The U.S. trade war appeared to hit the pause button at the G-20 meeting in Buenos Aires over the weekend, with U.S. President Trump and Xi agreeing to hold off on planned tariff increases for 90 days while trade talks continue. The dinner meeting between the two had been closely watched, with markets already beginning to price in optimism ahead of time that something positive might emerge.

But analysts were expressing some skepticism over whether the deal amounted to much.

“Negotiations toward a lasting deal are likely to be fraught. And broader headwinds mean that China’s economy still looks set to slow next year even without any drag from U.S. tariffs,” Capital Economics said in a note on Monday.

Currencies

The U.S. dollar index was at 96.95 at 7:05 A.M. SGT after touching levels as high as 97.14 in Monday’s session, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 2.976 percent at 8:32 A.M. SGT, dropping from as high as 3.049 percent in Monday’s session, according to Tullett Prebon data.

The euro/dollar was at 1.1355 at 8:35 A.M. SGT after trading in a 1.1318 to 1.1380 range on Monday, according to DZHI data.

Sterling stumbles

The British pound/dollar was at 1.2721 at 8:35 A.M. SGT after trading in a 1.2698 to 1.1825 range on Monday, according to DZHI data.

Despite stronger U.K. manufacturing data, “traders ignored the news as Brexit woes continued to dog the pair on reports that as many as one-third of PM May’s party may vote against her deal on December 11,” Boris Schlossberg, managing director of foreign-exchange strategy, said in a note on Monday.

The dollar/yen was at 113.589 at 8:35 A.M. SGT after trading in a 113.34 to 113.85 range on Monday, according to DZHI data.

Yuan climbs

The dollar/yuan was at 6.8806 at Monday’s close, after trading in a 6.8797 to 6.9604 range during the session, according to DZHI data.

“Any thought of a move to the mystical 7 level by year-end took a shot right to the heart as the 90-day moratorium guarantees the PBOC will keep the yuan trading in the U.S. administration comfort zone, which is probably stable to stronger,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Tuesday.

“In addition to the unwind of a colossal trade risk premium [supporting the yuan], there is a slightly positive turn on Asia going, barring any U-turn on this truce,” he added.

The dollar/Singapore dollar was at 1.3667 at 8:36 A.M. SGT after trading in a 1.3653 to 1.3704 range on Monday, according to DZHI data.

The dollar/Malaysian ringgit was at 4.1600 at 8:35 A.M. SGT after trading in a 4.1588 to 4.1840 range on Monday, according to DZHI data.

The dollar/Indonesian rupiah was at 14,235 at Monday’s close after trading in a 14,205 to 14,335 range on Monday, according to DZHI data.

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