US Dollar Slightly Changed as Trade Concerns Curb Gains

The US dollar was a little changed on Wednesday, as escalating trade tensions between the US and its trade allies slightly settled down, while the People’s Bank of China (PBOC) set the weakest yuan fix since December 2017.

The US dollar index, which monitors the greenback’s strength against six major peers, was up 0.02 percent to $94.38, after rising 0.4 percent overnight to break four consecutive sessions of declines.

While the dollar index climbed from a two-week low of $94.17, after a modest softening on the trade dispute between the US and its trade partners renewed risk appetite, lingering wariness kept its gains in check.

Against the safe-haven currency yen, the dollar dropped 0.1 percent to 109.85, after increasing as much as 110.23 on Tuesday.

The greenback shed 0.05 percent to 1.3300 against its Canadian counterpart, while it added 0.02 percent to 0.9914 against the Swiss franc.

Chief forex strategist Masafumi Yamamoto stated that the dollar lacks guidance from the currently directionless US yields, adding that the matter of whether the Trump administration is ready to become even more conservative towards trade issues, or if it wants to ease its stance is difficult to determine.    

The 10-year US Treasury yield last stood at 2.849 percent on Wednesday. The yield has stayed in June at a 15 basis point range after slumping nearly 40 basis points in May, when it marked a seven-year high of 3.128 percent.   

Trump Shifts from Imposing China Investment Limits

Concerns over the escalating global trade spat eased a little, after US President Donald Trump signaled a change in direction on China investment limits.

The plans of imposing restrictions on Chinese investments in US technology companies and tech exports to China might not materialize, as Trump have suggested that they may do it through foreign investment reviews under the Committee on Foreign Investment in the United States (CFIUS).

A person with knowledge of the matter said the administration is expected to urge the Congress to finalize legislation updating a law that grants the government the authority to assess foreign investments for national security concerns.

The House approved a bill on Tuesday that would allow revisions to the CFIUS law. The provisions are likely to be considered as part of a joint House-Senate committee meeting reviewing a defense policy bill approved by the Senate last week.

PBOC Sets Weakest Yuan Reference Rate

The yuan fell to its lowest on Wednesday, following the PBOC’s move to lower the currency’s reference for the sixth straight day to its weakest in six months.

The dollar-yuan pair was up 0.3 percent to 6.6022, marking its lowest since December, after the central bank set the yuan mid-point rate at 6.5569 against Tuesday’s 6.5180.

PBOC’s move was seen as China’s way of dealing with the impact of its ongoing trade row with the US.

The bank previously announced the injection of $100 billion into the economy by shrinking the Reserve Requirement Ratio (RRR) for banks to help the economy get through the burden of a trade war with the US.

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