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CURRENCIES

Euro rebounds; dollar eases on US-China trade talks

London

THE euro recovered on Thursday from its weakest since late June 2017 and the dollar fell after news that a Chinese delegation will travel to the United States for trade talks, with investors buying back into currencies hit hard in the recent sell-off.

Many emerging market currencies also rose, clawing back some of Wednesday's losses thanks to easing fears over the knock-on effects from a slide in the Turkish lira.

Global equity markets were mixed, however, underlining how nervous investors remain.

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"That China and the US are beginning to talk again is supporting the market," said Commerzbank currencies strategist Thu Lan Nguyen. "As the (Turkish) lira did not depreciate further, that has taken out some tension from the market." She also emphasised that the currency crisis in Turkey is far from over because the authorities have yet to tackle the root causes.

More important for major currencies on Thursday were developments in the months-long trade conflict between the United States and China.

China's Ministry of Commerce said it had received an invitation from the US for talks to be held with US Under Secretary of Treasury for International Affairs David Malpass.

The euro rose 0.2 per cent to US$1.1367, away from Wednesday's low of US$1.1301.

The dollar, which has gained on bouts of investor jitters as traders seek safety in the higher-yielding and most liquid currency, fell after a recent strong run. The dollar index slipped 0.1 per cent to 96.613.

China's yuan, which has fallen in recent months on concerns about the impact on its economy of the trade conflict with the US, gained 0.7 per cent in offshore markets to 6.9005 .

Emerging market currencies bounced across the board, including the South African rand, the Mexican peso and Russian rouble.

Turkey's lira rallied about 3 per cent to 5.7923 before a presentation by Finance Minister Berat Albayrak to investors, but is still down 34 per cent against the dollar this year.

Despite Thursday's calm, analysts remain cautious about the outlook for markets, particularly those outside of the US that have looked vulnerable whenever investors get nervous.

Simon Derrick, chief currency strategist at BNY Mellon, said "a seeming disconnect between US markets and those elsewhere is becoming increasingly obvious", given the performance of US equities and the dollar in 2018. "The risk is that the apparent calm in US markets may be giving US investors a false read about how volatile the next few months might prove for global markets," he said.

The yen paused after its recent run, with the dollar gaining 0.1 per cent to 110.84 yen.

The Australian dollar, seen as a proxy for China-related trades, climbed 0.4 per cent to US$0.7265 after falling to US$0.7202 on Wednesday, its weakest since January 2017. REUTERS