US dollar dips to 2-week lows on Xi's comments

London

THE US dollar dipped to a two-week low against a basket of currencies on Tuesday after Chinese President Xi Jinping's promise to cut import tariffs eased concerns about a trade conflict.

Relatively high-yielding currencies such as the Australian dollar and the Canadian dollar were the chief beneficiaries in London trading of a revival in risk appetite against the US dollar while the yen and the Swiss franc weakened.

"President Xi's comments and seasonality effects with April being traditionally a strong month for risk appetite is helping currency markets recover some ground," said Simon Derrick, chief currency strategist at BNY Mellon in London.

Mr Xi pledged to open the economy further and lower import tariffs on products including cars. In his first public reaction to the tariff stand-off, Mr Xi refrained from increasing tension with Washington and appeared to give clear backing for open economies rather than isolationism.

The US dollar-yen rate rose 0.2 per cent at 107.01 yen after going as high as 107.245. Against a broader basket of currencies, the greenback was trading at a two-week low at 89.63. It has fallen nearly one per cent in the last three trading sessions.

"Xi explicitly did not continue the trade war rhetoric so this is going to be risk-friendly and the market will be relieved," said Kit Juckes, a macro strategist at Societe Generale.

But in a sign that market risks lurk on the sidelines, the Russian rouble tanked by 4 per cent on Tuesday after a similar drop on Monday, raising some concerns that more weakness in the Russian currency could trigger a wider shakeout in broader positions in emerging markets.

Russian assets have been pounded following Washington's move to impose major sanctions against Russian businessmen and their companies to punish Moscow for its alleged meddling in the 2016 US election and other "malign activity".

If the sell-off continues to accelerate and the rouble significantly decouples from economic fundamentals and oil prices, the central bank may consider selling hard currencies to slow down the pace of depreciation, Rabo Bank strategists wrote in a daily note.

Elsewhere, the euro briefly jumped after a European Central Bank policymaker said the bank could raise its sub-zero deposit rate before normalising monetary policy.

The single currency was trading 0.4 per cent up on the day at US$1.2362 after rising to a high of US$1.2378. REUTERS