The increased risk appetite contributed to the rise of the Australian dollar after US government officials said trade talks between China and the United States would continue Wednesday for an unannounced third day.
The Australian dollar rose 0.2% to $ 0.7152, after peaking at $ 0.7172 in three weeks early in optimism talks over the Sino-US talks.
The Australian dollar is often seen as an indirect indicator of Chinese growth, as its economy relies on exports and China is the country’s main destination for its commodities.
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“The sharp slowdown in Chinese growth and the fact that the US stock market has been caught up by the weakness of the stock markets observed elsewhere (…) somehow encourage the conclusion of a negotiated agreement in the coming months”, said Jason Wong, Senior Market Strategist at BNZ Markets in Wellington”
The recovery of risk assets has accelerated since last Friday when Federal Reserve Chairman Jerome Powell realized the risks to the economy and would be patient and flexible in political decisions this year.
- The dollar index, which measures the greenback versus a basket of six peers, fell 0.1% to 95.787 early in the session.
- The index, which had risen 0.2% in the previous session, was near the lowest level in 11 weeks, 95.638 reached earlier this week.
Against the yen, the dollar remained virtually unchanged at 108.73 yen per dollar.
“Until the beginning of the year, the market had become too pessimistic about the global economy, but it seems that this kind of pessimism is fading away,” said Masafumi Yamamoto, chief strategist of the monetary policy at Mizuho Securities.
“The recovery of the market climate will continue. In this context, I think the dollar/yen will gradually strengthen and reach 110. “
Elsewhere, the euro rose 0.2% to the US $ 1,1457, but its rebound was not large enough to recover a slightly more pronounced loss in the previous session due to concerns over the slowdown in the economy. the economy of the euro area.
An unexpected fall in German industrial production for the third consecutive month weighed on the euro overnight. The decline was modest, but it highlighted concerns about the slowdown and cautiousness of the European Central Bank as it tried to divert the region from economic recovery.
“I think there will be another drama. Uncertainty dominates the pound again. It will face downward pressure and the euro will also suffer, “said Yamamoto of Mizuho.
The UK Parliament is expected to vote on Prime Minister Theresa May’s January 15 deal on Brexit, and the upcoming approach is expected to dominate the sterling trade. May is ready to lose the vote unless she can convince opponents inside and outside her party to support her project. (Edited by TopAsiaFX)