CURRENCIES: Pound Trades Higher Against Dollar, Euro As EU Talks Compromise Brexit Deal
October 10 2018 - 04:31PM
Dow Jones News
By Mark DeCambre, MarketWatch
Haven flows take Japanese yen to two-week high
The British pound gained against its major rivals Wednesday as
currency traders focused on progress in talks between the U.K. and
the European Union, as Britain attempts to amicably exit from the
trading bloc with a trade arrangement in tow.
A report from Bloomberg News
(https://www.bloomberg.com/news/articles/2018-10-10/brexit-talks-zero-in-on-u-k-customs-fix-as-deal-optimism-grows)
said EU officials are discussing "a compromise Brexit deal," which
would see the U.K. retain -- at least temporarily -- some of its
pre-Brexit customs arrangement.
The sticking point in hardscrabble negotiations between
officials from the European trade bloc and the U.K. center on how
to avoid erecting a physical border between Northern Ireland, part
of the U.K. proper, and Ireland, an EU member. How the overall
Brexit deal should be enforced also has been a hot-button
issue.
Reports, however, have signaled that despite differences between
London and Brussels, Brexit could be achieved in time for a
critical summit of EU leaders next week
(http://www.marketwatch.com/story/negotiatiors-for-uk-eu-nudge-closer-to-brexit-deal-2018-10-09).
That would still leave the two sides time to agree on an outline on
their future trade and security ties and for the British and
European parliaments to ratify a deal before the scheduled split on
March 29.
"Sterling is being lifted by hopes of a Brexit deal between the
UK and EU. That's difficult to capture within our high-frequency
currency indicators but, where it does show through, it is
definitely providing reasons for strength," wrote Steven Barrow,
currency and fixed-income strategist at Standard Bank, in a
Wednesday research report.
Indeed, the British pound rose above its 10-day high Wednesday
to $1.3217, up 0.5% on the day, compared with $1.3142 late Tuesday
in New York.
Meanwhile, pressures on China's currency continue to mount amid
tariff tensions with the U.S. and signs of a slowing economy.
Investors have been betting that the dollar will soon buy a record
amount of yuan, above a key psychological line in the sand at
7.00.
The Chinese yuan most recently was flat at 6.9227, compared with
6.9228 on Tuesday, while the offshore yuan , which trades more
freely, was at 6.9315, up 0.2%, according to FactSet data.
Traders worry that a weakening yuan could ripple through global
markets as China's stock market also demonstrates signs of
fragility.
See:Treasury's Mnuchin warns China against currency devaluation
as yuan falls: report
(http://www.marketwatch.com/story/treasurys-mnuchin-warns-china-against-currency-devaluations-as-yuan-falls-report-2018-10-10)
"[The markets] continue to underprice the destabilizing effect
of a weaker yuan will have on global equity markets," wrote Stephen
Innes, head of trading at Oanda, in a report late Tuesday. China's
Shanghai Composite Index ended Wednesday up marginally but is down
nearly 18% so far in 2018, underlining sentiment in the world's
second-largest economy.
Check out: Here's why traders think the Chinese yuan could reach
a record low against the dollar
(http://www.marketwatch.com/story/heres-why-traders-think-the-chinese-yuan-could-reach-a-record-low-against-the-dollar-2018-10-09)
Meanwhile, the dollar, as measured by the ICE U.S. Dollar Index
, was trading lower at 95.502. The index is a gauge of a half-dozen
dollar rivals, which is heavily influenced by the euro . The euro
was trading at $1.1522 against bucks, compared with $1.1493 late
Tuesday.
Elsewhere, the Japanese yen is on track for its fifth
consecutive winning session as traders seek out haven assets, with
equity markets falling Wednesday.
"Unless macro conditions warrant otherwise, a back-up in yields
may do more to upset the equity love affair than support another
leg higher in USDJPY, leaving the pair more prone to a move lower,"
said Mazen Issa, senior FX strategist at TD Securities.
The yen was last trading at Yen112.51, versus Yen112.95 in the
prior session.
(END) Dow Jones Newswires
October 10, 2018 16:16 ET (20:16 GMT)
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