CURRENCIES: Dollar Struggles For Direction As U.S.-China Trade Fight Intensifies
September 18 2018 - 11:45AM
Dow Jones News
By William Watts, MarketWatch , Anneken Tappe
The U.S. dollar on Tuesday traded in a tight range, struggling
for direction in the wake of an intensification of the U.S.-China
trade fight after the Trump administration followed through on its
plan to impose tariffs on an additional $200 billion in Chinese
goods, prompting Beijing to vow retaliation.
The ICE U.S. Dollar Index , which tracks the currency against a
basket of six major rivals, was last little changed in negative
territory at 94.457. The dollar index steadied the tone remains
soft, nursing a 0.5% weekly loss and a 0.7% decline so far in
September, according to FactSet.
"Market reaction was muted as the tariffs had been widely
telegraphed," said Elsa Lignos, global head of FX strategy at RBC
Capital Markets, in a note. "We have now reached a level of
affected imports where it will necessarily start to impact consumer
prices" in the U.S.
Read:5 things about a U.S.-China trade war that might surprise
investors
(http://www.marketwatch.com/story/5-things-about-a-us-china-trade-war-that-might-surprise-investors-2018-09-11)
Trump on Monday said the U.S. would impose a 10% tariff
(http://www.marketwatch.com/story/trump-to-impose-another-200-billion-in-tariffs-on-chinese-goods-2018-09-17)
on about $200 billion in Chinese goods and threatened to add
hundreds of billions more. The 10% tax takes effect on Sept. 24 and
will rise to 25% at the end of the year, administration officials
said. Beijing responded by announcing retaliatory tariffs
(https://www.wsj.com/articles/chinese-officials-scramble-to-respond-to-trumps-new-tariffs-1537275015?mod=hp_lead_pos1)
on $60 billion of American goods.
Lignos said reaction might have also been limited due to hopes
that the delay of the 25% tariff rate until January means more time
for negotiation and reconciliation once U.S. midterm elections are
out of the way -- a scenario she termed "unlikely."
Check out:India tries to stem rupee selloff in another round of
emerging-markets turmoil
(http://www.marketwatch.com/story/india-tries-to-stem-rupee-selloff-in-another-round-of-emerging-markets-turmoil-2018-09-17)
The timing of the dollar's pullback "has coincided with the rise
in concern about how much Trump's tariffs on China's goods could
slow productivity and growth in the U.S.," said Jane Foley, senior
FX strategist at Rabobank, in a note.
But the biggest impact from the tariffs is likely to be felt in
China, she said, which will keep investors nervous and continue to
underpin the dollar in the medium term.
The People's Bank of China guided the yuan to a slightly softer
fix versus the dollar overnight as traders attempt to discern how
far Beijing will go in easing domestic policies to counter the
strain over slowing growth, Foley said. The buck last bought 6.8621
yuan in Beijing trading, up 0.1%.
In the offshore market, the dollar fetched 6.8684 yuan , little
changed versus late Monday in New York.
In other major currency pairs, the euro benefited from the
sluggish greenback, trading at $1.1697, up from $1.1685, while the
U.S. currency edged up 0.4% versus the Japanese currency to fetch
112.36 yen, its highest since mid-July.
(END) Dow Jones Newswires
September 18, 2018 11:30 ET (15:30 GMT)
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