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US dollar nears one-month high amid trade tensions

THE US dollar held near a one-month high on Wednesday as trade tensions between the world's two biggest economies remained high before Fed minutes that may give more clues on what prompted US policymakers to strike a broadly neutral stance this month.

Officials in both countries dug in their heels as tensions intensified since Washington last week blacklisted Chinese telecom equipment company Huawei Technologies Co Ltd, a move that has rattled global markets.

China must prepare for difficult times as the international situation is increasingly complex, President Xi Jinping said in comments carried by state media on Wednesday.

"Everyone is digging in for a long fight," Brown Brothers Harriman strategists said in a note.

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Against a basket of its rivals, the US dollar was broadly steady at 98.032 and just shy of a one-month high of 98.134, its highest since late April.

While risky assets heaved a sigh of relief after the United States eased trade restrictions on Huawei, the lack of a significant breakthrough has kept investors on edge.

"We are still sceptical over a long-lasting recovery," said Charalambos Pissouros, a senior markets analyst at JFD group.

"Before we get confident on that front, we would like to see concrete signs that both the US and China are truly willing find common ground."

Markets also waited for the Fed minutes, which are expected to give insights into the May 1 meeting when officials decided to keep interest rates steady and signalled little appetite to adjust them any time soon, taking note of strong jobs growth.

The Japanese yen and the Swiss franc remained firm against the US dollar with both currencies set to gain nearly one per cent so far this month against the greenback signalling investors were broadly dialling back on risky assets.

However, MUFG Bank's chief currency strategist Minori Uchida said he expected demand for the US currency to remain strong on a need for dollar funding among emerging markets and on investor cautiousness due to the Sino-US trade dispute.

"Even if yields fall, that's not likely to put a big dent in the dollar's rise," he said.

Sterling was the only notable loser in the European session with the British currency falling 0.4 per cent to a fresh four-month low against the US dollar at US$1.2651.

Political uncertainty in Britain deepened as Prime Minister Theresa May's final attempt to seal a Brexit deal failed to win over opposition lawmakers and many in her own party.

Elsewhere in the foreign exchange market, the euro was steady at US$1.1162 before a speech by European Central Bank chief Mario Draghi in Frankfurt. REUTERS