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FOREX-Dollar hovers near 6-week highs on fresh trade, global growth worries

Published 11/02/2019, 02:29 pm
Updated 11/02/2019, 02:30 pm
© Reuters.  FOREX-Dollar hovers near 6-week highs on fresh trade, global growth worries
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* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Dollar stays firm as investors seek safe haven

* Euro, sterling marginally weaker versus greenback

* Onshore yuan falls vs dollar as China markets reopen

By Vatsal Srivastava

SINGAPORE, Feb 11 (Reuters) - The dollar stayed near a six-week high against a basket of currencies as fresh worries over U.S.-Sino trade tensions and global growth pushed investors towards the safety of the greenback.

"U.S.-China talks are the big focus for the week and the dollar strength is indicative of the cautious market sentiment right now owing to its safe-haven status," said Nick Twidale, chief operating officer at Rakuten Securities Australia.

"The Aussie dollar and the euro are at vulnerable levels right now and further dampening in risk sentiment can lead to further downside in these currencies."

U.S. negotiators this week will press China on longstanding demands to reform how it treats U.S. companies' intellectual property in order to seal a trade deal that could prevent tariffs from rising on Chinese imports. dollar gained 0.1 percent versus the yen JPY= to 109.82. However, traders expect moves in dollar/yen to be small on Monday as Japanese markets are closed for a public holiday.

The dollar index .DXY , a gauge of its value versus six major peers, was marginally higher at 96.64, putting it on track for a eighth straight day of gains.

The Swiss franc CHF= , another currency perceived to be a safe-haven asset was marginally higher at 0.9995.

Trade tensions between the world's two largest economies have been a major driver of global investor sentiment over the past year. Market confidence took a hit last week when U.S. President Donald Trump said he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline set by the two countries to achieve a trade deal. has vowed to increase U.S. tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent if the two sides cannot reach a deal by March 2.

On Monday morning, when China markets reopened after a one-week holiday break, the dollar was 0.5 percent higher versus the yuan CNY= at 6.7753 while the offshore yuan CNH= was relatively unchanged at 6.7808.

Philip Wee, currency strategist at DBS, expects the yuan to remain around 6.80 until there's more clarity on how the U.S.-Sino trade dispute plays out.

The euro EUR= was marginally lower versus the greenback at $1.1322 in Asian trade while the Aussie AUD= was 0.1 percent higher at $0.7096, after a disastrous week in which it lost 2.2 percent. strength in the dollar has come despite the Federal Reserve taking a dovish stance at its policy meeting in January. For now, investors are piling into the safety of the greenback due to fears of a sharp global economic slowdown.

The euro EUR= came under pressure as core European government debt yields touched their lowest in over two years. The single currency has lost 2.5 percent so far this month.

Benchmark German yields were just 10 basis points away from zero percent.

The European Commission sharply cut on Thursday its forecasts for euro zone economic growth for this year and next, with the bloc's largest economies expected to be held back by global trade tensions and domestic challenges. month, the International Monetary Fund also downgraded its forecasts for global growth.

Elsewhere, sterling GBP= was down 0.1 percent at $1.2935. Traders expect the pound to remain volatile amid heightened political uncertainty over the Brexit process. New Zealand dollar, which lost 2.2 percent last week, was 0.3 percent higher at $0.6767, Analysts expect the kiwi to remain under pressure over the near term.

The Reserve Bank of New Zealand is expected to leave interest rates unchanged this week but may adopt a more dovish tone and cut forecasts, in line with other major central banks that see growing risks to the global outlook.

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