Euro, Commodity-Linked Currencies Boosted by U.S.-China Trade Optimism

Euro, Commodity-Linked Currencies Boosted by U.S.-China Trade Optimism

The euro and commodity-linked currencies rose on Wednesday as optimism over U.S.-China trade negotiations improved investor sentiment and encouraged some selling of the dollar.

Expectations of more easing in China also supported markets, with Asian shares rallying and European stocks rising at the open.

Adam Cole, Chief Currencies Strategist at RBC, said those factors were giving a “better tone for risk this morning. It is all about a general risk-on mood”.

News that Beijing and Washington had agreed to extend trade talks in Beijing for an unscheduled third day on Wednesday boosted oil prices, with U.S. West Texas Intermediate crude oil futures topping $50 a barrel for the first time this year.

That, in turn, helped spur demand for riskier assets and commodity-linked currencies.

The euro rose 0.2 per cent to $1.1464 as increased demand for currencies deemed riskier knocked the dollar lower.

An unexpected fall in German industrial output for the third straight month had weighed on the euro on Tuesday.

The drop underscored concern about a slowdown and the European Central Bank’s caution as it tries to wean the region off stimulus.

The dollar index traded down 0.2 per cent at 95.753.

The Australian dollar, considered a barometer of sentiment toward China, rose 0.2 per cent to $0.7155.

The Aussie has now risen off near-decade lows below $0.68 reached earlier this month.

The Chinese yuan gained 0.3 per cent to 6.8341 in offshore markets.

The Canadian dollar also benefited, rising more than 0.2 per cent to C$1.3242.

The Norwegian crown was up more than a quarter of a per cent. The New Zealand dollar gained 0.6 per cent to $0.6760.

The rally in riskier assets has accelerated since last Friday when Federal Reserve Chairman Jerome Powell said he was aware of risks to the economy and would be patient and flexible in policy decisions this year.

That eased concern of raising rates as the U.S. economy weakened.

Against the yen, the dollar gained a tenth of a per cent to 108.85 yen per dollar.

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