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US dollar touches 3-week high; yen up on renewed trade uncertainty

New York

THE dollar rallied to a three-week high on Friday, getting some safe-haven bids, as risk appetite for higher-yielding currencies waned with renewed uncertainty about the rollback of existing tariffs, a major component of a preliminary US-China trade deal.

The Japanese yen, another safe haven, rose as well.

US President Donald Trump on Friday further magnified the uncertainty, saying that he had not agreed to roll back tariffs. His comments came a day after US and Chinese officials reportedly agreed to roll back tariffs on each others' goods in a "phase one" trade deal if it is completed.

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But a report also on Thursday seemed to contradict that news, with multiple sources saying the rollback faces fierce internal opposition at the White House and from outside advisers. "What really has been driving the market is this underlying uncertainty over whether or not we will get that rollback," said Brian Daingerfield, head of G10 FX strategy, at Natwest Markets in Stamford, Connecticut.

Overall, though, sentiment is likely to remain supportive for risky assets, as efforts are being made to do a trade deal, which would remove a huge risk to the global economic outlook.

White House spokeswoman Stephanie Grisham told Fox Business Network in an interview on Friday that tariffs could be lifted on Chinese goods if an agreement is reached, but she gave no further details.

Jonas Goltermann, senior markets economist at Capital Economics in London, believes that as trade tensions persist, the dollar is likely to stay strong. "While we don't expect relative interest rates to boost the dollar much further in the near term, we think that continued trade tensions and a slowing global economy mean that the greenback will rise a bit further in 2020 despite the fact that on a trade-weighted basis it is already near its highest level since the early 2000s," Mr Goltermann said.

The dollar fell 0.1 per cent to 109.17 yen. The Canadian dollar slid against the greenback after data showed the Canadian job market unexpectedly stagnated in October, losing 1,800 net positions, while the unemployment rate remained at 5.5 per cent. The US dollar was last up 0.4 per cent at C$1.3228. REUTERS