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Aussie, yuan gain on US-China trade hopes

[TOKYO] The Australian dollar and the Chinese yuan rose early Monday on hopes Washington and Beijing were close to a trade deal after a bitter year-long tariff dispute.

Fuelling such expectations was a report from the Wall Street Journal on Sunday that said the United States and China could reach a formal agreement at a summit around March 27 given progress in talks between the two countries.

The Aussie gained 0.40 per cent to US$0.71055 while the New Zealand dollar rose 0.45 per cent to US$0.6823.

The Chinese yuan ticked up 0.25 per cent to 6.6970 to the US dollar in the offshore trade, edging near its 7 1/2-month high of 6.6737 hit last week.

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The yuan has been supported since late last month by hopes that Washington and Beijing could reach a trade deal later this month.

While the trade optimism pushed the dollar lower against most Asian currencies, it helped erase the greenback's earlier losses against the safe-haven yen, which followed US President Donald Trump's criticism about Federal Reserve monetary policy and a strong dollar.

The US dollar traded at 111.77 yen, having hit a 10-week high of 112.08 on Friday. It had dipped to 111.75 yen after Mr Trump's comments on the Fed.

"We have a gentleman that likes a very strong dollar at the Fed... I want a strong dollar, but I want a dollar that's great for our country not a dollar that is so strong that it is prohibitive for us to be dealing with other nations," he told his supporters in a speech.

The positive investor sentiment offset some of the caution that followed soft US data published on Friday.

Factory activity, gauged by the Institute for Supply Management's (ISM) survey, hit the lowest level since November 2016 while personal income fell for the first time in more than three years.

Expectations that the Fed will avoid raising interest rates any time soon have also underpinned risk sentiment.

"This week we have a few central bank meetings, including the European central Bank, Australia and Canada. All of them are likely to take either a dovish or neutral stance. That should support 'risk-on' trades," said Shinichiro Kadota, senior FX & rates strategist at Barclays.

The euro held firm at US$1.1378.

Elsewhere, the British pound found support on receding fears that Britain will leave the European Union without a deal after Prime Minister Theresa May said last week lawmakers would get to vote on a delay to Brexit if they choose not to approve her withdrawal agreement.

The pound rose 0.2 per cent to US$1.3238, inching towards its near eight-month high of US$1.3351 hit last week.

REUTERS