SINGAPORE- The dollar crept off milestone lows against other majors on Thursday, and held on to gains against the yuan, as heightened Sino-US tension put a bit of caution into currency markets.
The United States gave China until Friday to close its consulate in Houston amid accusations of spying, and President Donald Trump said it was “always possible” other Chinese missions could be ordered to close as well.
China has vowed to respond and the escalation in tension between the world’s two largest economies sent the yuan on its sharpest slide in nearly two months on Wednesday and has helped the greenback find support in Asian trade on Thursday.
The euro sat at $1.1571, about 0.3 percent below a 21-month high of $1.1601, which it hit overnight in the afterglow of Europe’s leaders agreeing on a coronavirus rescue package.
The Australian dollar pulled back from a 15-month peak and was steady at $0.7143, while the kiwi retreated slightly from a six-month top to sit at $0.6657.
Volumes were lightened by a public holiday in Japan.
“The market is still trying to ascertain whether this increase in geopolitical tension is going to be enough to derail the positive vibes we’ve been seeing,” said Rodrigo Catril, senior FX strategist at National Australia Bank in Sydney.
“Recent history will tell you that the market will tend to digest this stuff and carry on in its merry way…but a bit of caution is warranted, and the yuan moving higher is probably the canary in the coalmine that we need to keep an eye on.” — Reuters
