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Swiss franc extends fall as markets eye US-China deal
The Swiss franc weakened broadly against its rivals on Monday, extending its week-long losing streak, while the Australian and Canadian dollars gained as hopes of a Sino-American trade deal encouraged a move away from perceived safe-haven assets.
In a further sign of improving risk appetite, the Canadian dollar, a barometer of sentiment towards global trade, strengthened to a three-month high versus the greenback.
"Positive trade headlines continue to support our view that trade tensions are easing," said Win Thin, global head of FX strategy at Brown Brothers Harriman. "We believe there is a high probability of some trade deal being signed next month, including lowering of existing tariffs."
The franc's weakness was most pronounced against the trade-oriented currencies such as the Australian dollar, against which it fell 0.3 per cent to a near five-month high.
The greenback was on the back foot on Monday after notching up a 0.5 per cent rise last week following news on Saturday that the US and China are "close to finalising" some parts of a trade agreement. It was down 0.1 per cent on Monday at 97.76.
In another sign of waning dollar bullishness, speculators cut their long-held long dollar positions against a broad basket of its rivals including some emerging market currencies to US$15.31 billion as of Oct 22, versus US$20.79 billion the previous week, according to calculations by Reuters and the US Commodity Futures Trading Commission.
This is the smallest long position since Sept 17.
Investors are focused on the US Federal Reserve meeting on Wednesday, when policymakers are expected to cut interest rates - a move which is already priced in though Fed watchers will be waiting for clues on the future policy outlook.
"There's still an awful lot of discrepancy and uncertainty in the markets as to what the Fed will do next year," said Jane Foley, senior FX strategist at Rabobank, adding that "the market will be looking for clues as to which way that might go".
The euro was broadly firmer, up 0.1 per cent against the dollar and 0.2 per cent against the yen, while the pound was unchanged after European Council President Donald Tusk's announcement that European Union leaders agreed to accept the UK's request for a Brexit extension until Jan 31 2020. "The outlook for the euro has improved along with expectations for a trade deal and a Brexit deal," Ms Foley said. REUTERS