Dollar, yen fall as safe-haven allure eases after tariff delay
The safe-haven dollar and yen slid on Monday as risk appetite increased after U.S. President Donald Trump said he would delay a planned hike in tariffs on Chinese imports, suggesting trade negotiations between the two countries have made significant progress.
The U.S. deadline set earlier for imposing higher tariffs on Chinese goods was March 1.
Following news on the tariff delay, the yen dropped to a two-month low against the dollar and euro, and global equity markets advanced along with currencies that do well in risk-tolerant environments such as the Australian and New Zealand dollars.
In emerging markets, the South African rand led all gainers versus the greenback, rising 1.4 percent to 13.8495 rand per U.S. dollar.
“This speaks to the overall ‘risk-loving’ disposition of global markets in the wake of the White House’s weekend decision to delay tariff increases,” said Stephen Gallo, European head of FX strategy at BMO Capital Markets in London. “Fundamentals are meaningless,” he added.
Trump said on Monday he would hold a summit with China to sign any final trade deal and would meet with Chinese President Xi Jinping at his Mar-a-Lago estate in Florida.
Mazen Issa, senior FX strategist at TD Securities in New York, said the “stand down” posture on the trade talks suggested that a “more substantive deal may be in the works that could address structural issues related to intellectual property theft and forced technology transfers.”
In afternoon trading, the dollar index, which measures the currency’s value against a basket of six currencies, fell 0.09 percent to 96.42.
The yen was also weaker, sliding to a two-month low verus the euro, which was last at 126.255 yen, up 0.7 percent. The Japanese currency also fell against the dollar, which last changed hands at 111.03 yen, up 0.32 percent.
China’s yuan, meanwhile, touched a seven-month high while Chinese equities surged as investors and European shares also performed well. The offshore yuan rose as high as 6.6737 per dollar to touch its strongest since mid-July and was up 0.3 percent at 6.68. China’s yuan has strengthened 2.7 percent against the dollar in 2019, reversing some of last year’s 5.5 percent loss.
The Australian dollar, seen as a proxy for China risk because of Australia’s dependence on Chinese demand for its exports, rose 0.62 percent to $0.7171.
The New Zealand dollar gained 0.57 percent to $0.6882.
The euro also gained against a weaker dollar, adding 0.16 percent to $1.1359, keeping it within recent trading ranges.