The safe-haven yen and Swiss franc rallied against the dollar on Tuesday as risk appetite eased after US President Donald Trump said a trade deal with China might have to wait until after the 2020 US presidential election.
China’s offshore yuan fell to its weakest versus the dollar since October after Trump’s comments.
The surprise statement hit the US dollar broadly as investors dumped the currency, which has tended to rise when optimism over a trade deal has grown. Market participants have long been waiting for a final trade deal, especially as both countries appeared to be nearing a preliminary one.
Trump said he had no deadline on agreement with Beijing, sparking a selloff in equities.
The news came after Trump on Monday said his administration would impose tariffs on metal imports from Argentina and Brazil on Monday and likely would impose more on a range of French goods.
“Markets have been jostled around with Trump’s newfound affinity for trade tariffs,” said Mazen Issa, senior FX strategist at TD Securities in New York.
“In the last 24 hours, he has ignited tensions with Brazil, Argentina, France and China. Nonetheless, risk sentiment has absorbed the latest developments,” he added.
Analysts pointed out though that Trump’s missives on trade came at a time when impeachment developments will come into more focus this week. Trump has been accused of improperly pressuring Ukraine to probe former vice president Joe Biden, a political rival in the 2020 presidential election.
The Democratic-controlled House Intelligence Committee is scheduled to vote on its findings later on Tuesday. The matter will then go to the House Judiciary Committee, which will launch its proceedings on Wednesday.
“It is perhaps not a coincidence that Trump may be trying to disrupt the news cycle,” TD’s Issa said.
In mid-morning trading, the dollar fell 0.3% against the yen to 108.60 yen. Against the Swiss franc, the dollar also slid, down 0.4% at 0.98752 franc.
The dollar index slipped 0.1% overall to 97.743
China’s offshore yuan was a big casualty as well, with the with the dollar rising 0.4 percent to 7.0695 yuan, its highest since late October.
Moves in currency markets though were broadly contained, with volatility remaining low and investors not appearing to take much fright.
Of concern for the dollar’s fortunes, however, was Monday’s weak US manufacturing report.
The US Institute for Supply Management said its index of national factory activity fell to a below-forecast 48.1 in November. Separate data showed construction spending declined in October.
The readings surprised economists who had recently raised US growth forecasts for the fourth quarter.
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