Asian Stocks Underpinned by Trade Deal Optimism; Trump Fails to Talk Down U.S. Dollar

The major Asia-Pacific stock indexes are trending higher early Monday amid a report from the Wall Street Journal that the United States and China are inching closer to a trade deal.

The report went on to say that Beijing is offering to lower tariffs on certain U.S. products as part of a trade deal with Washington. The report appears to be just as optimistic as an article published on Friday by Bloomberg which said U.S. officials are preparing a final trade deal that U.S. President Trump and Chinese President Xi Jinping could sign within weeks.

At 03:21 GMT, China's Shanghai Index is trading 3045.60, up 51.59 or +1.72%. The South Korean KOSPI Index is trading 2199.67, up 4.23 or +0.19% and Hong Kong's Hang Seng Index is at 28871.15, up 58.98 or +0.20%.

In Japan, the Nikkei 225 Index is at 21782.12, up 179.43 or +0.83% and Australia's S&P/ASX 200 is at 6221.10, up 28.40 or +0.46%.

U.S. futures markets are also trading higher in the pre-market session. The benchmark March E-mini S&P 500 Index is trading 2818.25, up 13.25 or +0.47%. The blue chip March E-mini Dow Jones Industrial Average is at 26162, up 131 or +0.50% and the tech-based March E-mini NASDAQ-100 Index is at 7204.00, up 48.00 or +0.67%.

Trump's Comments Fail to Weaken U.S. Dollar

Early Monday, the U.S. Dollar is trading higher against most major currencies. The Greenback is strengthening because of the optimism over a U.S.-China trade deal with investors primarily ignoring comments by President Trump over the week-end on the impact of a strong greenback on the American economy. Firmer Treasury yields seem to be the catalyst making the U.S. Dollar a more attractive investment.

On Saturday, Trump reiterated his criticism of the Federal Reserve's monetary policy, saying it is promoting a strong U.S. Dollar, possibly at the expense of the U.S. economy.

"America is now booming like never before," Trump said. "Other countries are doing very poorly. That makes it even harder for us to be successful. Plus, we have a gentleman that likes raising interest rates in the Fed," he said referring to Federal Reserve Chair Jerome Powell.

"We have a gentleman that loves quantitative tightening in the Fed. We have a gentleman that likes a very strong dollar in the Fed. So with all of those things -we want a strong dollar but let's be reasonable-with all of that we're doing great. Can you imagine if we left interest rates where they were? If we didn't do quantitative tightening? I want a dollar that's great for our country but not a dollar that's prohibitive for us to be doing business with other countries."

In the past, Trump has been successful in talking down the U.S. Dollar. It isn't the case this time. With Treasury yields rising, the dollar is becoming a more attractive investment because of the widening interest rate differential against currencies like the Australian Dollar and Japanese Yen.

At this time, we have the Fed talking dovish and keeping its rate hikes on hold. However, Treasury investors are seeing things differently, pushing yields higher. The price action even suggests that Treasury investors may be pricing in at least one rate hike by the Fed this year and this is bullish for the dollar.

This article was originally posted on FX Empire


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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