US and China’s Phase One deal is back in the market as investors anticipate the nearing date for its final wrap-up. The dollar index slumped to $97.980 today at its lowest levels since November 7.
The two involved countries had “constructive talks” during a call last Saturday but refused to give comments.
Greenback traded against the safe-haven yen at ¥108.75 against last week’s lows with rising Sino-US hopes.
EUR/USD rose $1.10505 from a one-month low at a risk appetite increase in the Eurozone.
Analysts claim more news about the trade agreement will affect much of this week’s currency movements.
The Federal Reserve’s policy meeting minutes will come out on Wednesday. Commonwealth currency analyst Joseph Capurso suggests the minutes will include the notion that the US economy is “solid.”
Optimism for the Phase One agreement remains as US stock prices recently hit a record high.
Against the American dollar, the Aussie equivalent traded slightly lower at $0.6815. Share prices in Hong Kong amid the riots can dent risk-sensitive currencies like AUD.
Elsewhere, the USD/GBP pair soared a two-week high at $1.2946. The UK Prime Minister Boris Johnson said all Conservative Party candidates backed his Brexit deal.
Beijing Faces Phase One Effects
As Phase One approaches, Beijing is slowly diversifying its reserves to decrease its dependence on the US dollar.
Researchers revealed an increased risk of a financial decoupling between the countries. Washington’s move to delist Chinese stocks in the US restricted some American investments.
The US’s foreign exchange reserves were about 59% as of June. As retaliation, China plans to build up its “shadow reserves.”
Although China did not elaborate on its forex reserves, researchers believe GBP, JPY, and EUR are included in the list.
Beijing was the largest holder of US Treasurys until June, reducing its holdings until Japan surpassed them. The second-largest economy has reduced its holdings by $88 billion since last year.
The greenback significantly affects Chinese companies, according to global economist Paul Hsiao. The country has more than $500 million in foreign corporate debt.
- Trading Instrument