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Trade tensions hoist US dollar to near 2-week highs

London

THE US dollar rose to its highest level in almost two weeks against its major rivals on Tuesday, after President Donald Trump said that he would push ahead with tariffs on Chinese goods, fuelling concern about world trade tensions.

Sterling was the weakest performing major currency, falling across the board after Mr Trump said the agreement on the United Kingdom's departure from the European Union may make trade between the United States and Britain more difficult.

Separately, Mr Trump told the Wall Street Journal that he expected to move ahead with raising tariffs on US$200 billion in Chinese imports to 25 per cent from 10 per cent currently.

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The threat of an escalating trade conflict between the world's two biggest economies is a major source of concern for next year, amid expectations the global economy could slow, and a backdrop that has boosted demand for the safe-haven dollar.

BlackRock, for example, believes an escalation in the trade conflict could stoke fears of a devaluation in the Chinese currency. Credit Suisse strategists expect the yuan to weaken to a decade low of 7.20 per dollar by end-2019.

The dollar index, which measures the dollar's value against six other major currencies, rose 0.2 per cent to 97.28, its highest level in almost two weeks.

Broader optimism towards the greenback was reflected in positioning data for the week ending Nov 26, which shows hedge funds added a net US$1.28 billion long positions in the dollar .

Mr Trump's latest remarks on trade come just before a G-20 meeting in Buenos Aires on Nov 30 where Mr Trump and Chinese President Xi Jinping are expected to meet.

"The upcoming meeting between Trump and Xi is pivotal going into the year-end and for the outlook for global growth, which has shown signs of slowing," said Lee Hardman, a currency analyst at MUFG in London. "If there's no breakthrough, that makes it more likely that more tariffs will be imposed and that increases downside risks to trade."

The euro dipped to US$1.1305, its lowest level since mid-November. It was last trading at US$1.1343, down 0.1 per cent on the day.

The yen was steady at 113.67 yen per dollar, while the trade-sensitive Australian and New Zealand dollars inched higher. European stock markets were broadly weaker, while US stock futures pointed to a weak open for Wall Street shares. REUTERS