Greenback rises as trade war fears fade

London

THE US dollar strengthened broadly on Monday and neared a six-month high against the Japanese yen as investors bought riskier assets, encouraged by signs that trade tensions have yet to hurt momentum.

As the second-quarter corporate earnings season begins, investors appear to be ignoring the deepening trade conflict between the US and China. Instead, the focus is on decent economic data, including favourable US jobs figures and a healthy rise in German exports, which have pushed the US dollar and the euro higher.

"Despite a hesitant start to July, the US dollar remains among the strongest of currencies out there, owing to a hawkish central bank," said Forex.com market analyst Fawad Razaqzada.

The Federal Reserve is expected to raise US interest rates twice more this year at a time when other major central banks are refraining from monetary tightening. The greenback could enjoy a further boost if US consumer price inflation figures beat expectations when published on Thursday.

A broad appetite for risk in currency markets on Tuesday lifted the US dollar against the Japanese yen. It was up 0.5 per cent at 111.35 yen, approaching a six-month high.

Elsewhere, the British pound recovered some of the losses suffered after two ministers quit over the government's Brexit plans. Expectations that Theresa May will survive as prime minister to start negotiating her blueprint with the European Union (EU) briefly pushed sterling into positive territory on Tuesday, though GDP data in line with forecasts and the stronger US dollar weighed on the currency.

The pound had tumbled more than a cent on Monday to below US$1.32 amid speculation that Britain was descending into deep political turmoil less than nine months before it is to exit the EU in March 2019.

The pound strengthened against the euro to 88.28 pence, having hit a four-month low of 89.025 pence per euro on Monday .

Elsewhere, currency markets were broadly risk-positive as investors appeared to shrug off concerns about the US-China trade tensions.

The US dollar's index against a basket of six major currencies was up 0.3 per cent at 94.374 after falling on Monday to 93.711. That halted a rally by the euro, which fell 0.4 per cent to US$1.1706 and was heading for its biggest daily decline against the US dollar in more than a week.

The yuan rose 0.3 per cent in offshore markets to 6.6404 against the US dollar. REUTERS