Rival currencies to the U.S. dollar strengthened on Tuesday, reversing previous losses as a popular gauge for the greenback slipped ahead of the 4th of July holiday on Wednesday.
The ICE U.S. Dollar index
DXY, -0.20%
was down 0.4% at 94.661, erasing its gain from Monday.
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Among major currencies, the euro’s
EURUSD, +0.1031%
moves were most notable, not because the size of its advance, but because of its driver. Late Monday, Germany Chancellor Angela Merkel struck a deal on immigration with her coalition partners, seemingly resolving a spat that had been ongoing since the administration took office. If she hadn’t reached an agreement, Germany could have headed back to the polls, which would have weighed on European assets.
“The deal removes the risk of new elections in Germany and preserves the stability that Merkel has brought to eurozone’s largest economy,” said Boris Schlossberg, managing director of FX Strategy at BK Asset Management, in a note.
The euro last bought $1.1651, versus $1.1641 late Monday.
Still the euro “remains vulnerable to further trade tensions with the Trump administration. An escalation of trade tariffs especially against the auto industry would upend the delicate rebound and the send the unit to fresh yearly lows,” he added. “For now, however, the bellicose rhetoric has eased and that provided euro a modicum of support.”
Meanwhile, the People’s Bank of China said on Tuesday it’ll keep the yuan stable, seen as an early sign the central bank is ready to intervene to halt the slide in the currency.
“That sentiment may have helped risk appetite a little, but the U.S. also moved to block China Mobile from participating in the US telecoms market yesterday, underscoring existing tensions between the two,” wrote Scotiabank strategists Shaun Osborne and Eric Theoret.
The Trump administration cited “national security interests” as the reason it sought to block China Mobile. The yuan traded close to an 11-month low against the dollar before reversing course and strengthening.
One dollar last bought 6.6587 of the more freely traded offshore yuan
USDCNH, -0.3500%
, down 0.4%, and 6.6474 of the more restricted onshore yuan
USDCNY, -0.3255%
, down 0.3%.
Elsewhere, Mexico’s peso
USDMXN, -1.6999%
also notably reversed Monday’s slide, rallying more than 1% against its U.S. rival. The dollar last fetched 19.6578, versus 19.9546 late Monday.
Read: Who is AMLO? Meet Mexico’s new leftist president
The peso had a turbulent start to the week, initially rallying after Andrés Manuel López Obrador won the presidential election over the weekend, but then dropping for most of Monday trading. Though the leftist president-elect had been the frontrunner for the entire election campaign, thus not really surprising markets, the uncertainty about how he will navigate policy and the Mexico-U.S. relationship caused some investor worries.
Source : MTV
