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FOREX-Dollar holds gains vs yen, trade worries linger as China PMI looms

Published 29/06/2018, 11:25 am
© Reuters.  FOREX-Dollar holds gains vs yen, trade worries linger as China PMI looms
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* Yen loses steam on quarter-end flows, absence of tariffs news

* Dollar index near 1-year high, to post first quarterly gains

* Yuan to make biggest monthly loss ever on trade spat concerns

By Hideyuki Sano

TOKYO, June 29 (Reuters) - The dollar held firm versus the yen on Friday, supported by quarter-end buying as well as an absence of any fresh escalation in trade-related tensions between the United States and its major trading partners.

Still, trade worries look set to dominate the market with traders increasingly worried about the impact of Sino-U.S. trade disputes on China's economy.

The dollar firmed to 110.49 yen JPY= , having made gains for the last three sessions and nearing this month's high of 110.905, helped by seasonal buying at the end of quarter and half-year.

The yen, which tends to be bought on signs of economic stress because of expectations of Japanese asset repatriation, also lost some support after U.S. President Donald Trump indicated he would take a softer approach on Chinese investments in U.S. technology companies. dollar is also broadly supported thanks to the prospects of rising U.S. interest rates on the back of solid expansion in the U.S. economy.

The dollar's index against a basket of six major currencies .DXY =USD stood at 95.288, having risen to as high as 95.534 on Thursday, a high last seen almost a year ago.

The index is on course to make its first quarterly gain in six, having risen 5.9 percent so far.

That partly reflected a loss of momentum in the euro, which has been weighed by European Central Bank's dovish stance and concerns over political instability in the European Union.

The euro traded at $1.1560 EUR= , not far from an 11-month low of $1.1508 touched last week.

The pound fell to its lowest since early November on Thursday when the lack of progress in Brexit negotiations with the European Union lowered expectations of an interest rate hike from the Bank of England.

Sterling slid to 7 1/2-month low of $1.3050 GBP=D4 and hit 88.71 pence per euro EURGBP=D3 , a low last seen in early March. It was last at $1.3074 and 88.50 pence per euro.

Also on the radar is the weakness in China's yuan CNY=CFXS , which is on course to post its biggest monthly loss on record. It has lost 3.4 percent this month, surpassing the 2.7 percent fall seen in August 2015.

"We have Chinese economic data coming up tomorrow, one of the first readings after trade tensions have escalated. Chinese PMIs have been essentially flat for some time but if it shows a major deterioration, that could worsen sentiment," said Kyosuke Suzuki, director of forex at Societe Generale (PA:SOGN), referring to the official manufacturing Purchasing Managers' Index due on Saturday.

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