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Dollar holds awaiting signals on trade, Fed policy

Credit: REUTERS/THOMAS WHITE

The U.S. dollar was roughly unchanged Monday as investors held off on making big moves while awaiting developments in U.S-China trade negotiations and insight into the Federal Reserve's thinking on interest-rate policy.

By Kate Duguid

NEW YORK, May 20 (Reuters) - The U.S. dollar was roughly unchanged Monday as investors held off on making big moves while awaiting developments in U.S-China trade negotiations and insight into the Federal Reserve's thinking on interest-rate policy.

The dollar was 0.07% weaker against the euro EUR=, last at $1.116, but maintained gains made last week. It ignored trade bickering which saw China on Monday accuse the United States of harboring "extravagant expectations" for a trade deal, underlining the gulf between the two sides as U.S. action against Chinese technology giant Huawei began hitting the global tech sector.

"There is no clean single headline that you can point to that summarizes the day's price action," said Richard Franulovich, head of foreign exchange strategy at Westpac Banking Corp. Although the dollar was weaker against the euro, the Japanese yen and the Swiss franc, "These aren't big moves. You really have to squint."

Foreign exchange traders were also waiting to hear Jerome Powell's speech later Monday, which could offer insight into the Fed chair's thinking about interest rates and the effects trade tensions may have on the U.S. economy. On Wednesday, the Federal Open Market Committee will release minutes from its last meeting, which will be dissected for clues on the policymakers' decision to strike a broadly neutral stance earlier this month.

Powell's speech on Monday "will be something we're watching very closely to see if there are any comments from the Federal Reserve as to if they feel there will be a change in their outlook ... because of the increased trade tensions," said Chuck Tomes, portfolio manager at Manulife Asset Management.

Remarks by several members of the Fed on Monday contributed to the market's lack of conviction, as they showed a diversity in opinion at the U.S. central bank, said Franulovich.

"If (low inflation) turns out to be persistent, I’ll get more aggressive in pushing the FOMC to lower rates in reaction and try to recenter inflation expectations at 2%," St. Louis Fed President James Bullard said in an interview with Handelsblatt. (https://bit.ly/2YxUwPE)

Meanwhile, Atlanta Fed President Raphael Bostic is not expecting an imminent interest rate cut and is confident in the economy, he told CNBC in an interview on Monday.

Elsewhere, the Japanese yen JPY= was 0.09% stronger against the dollar, last priced at 109.96 yen. The Swiss franc CHF=, which like the yen serves as a safe-haven investment in moments of global tumult, was 0.23% stronger, last at 1.008 against the dollar.

USD index and CFTChttps://tmsnrt.rs/2Wi8Y0E

(Reporting by Kate Duguid and Saikat Chatterjee; editing by Jonathan Oatis)

((kate.duguid@thomsonreuters.com; +646-223-6118; Reuters Messaging: kate.duguid@thomsonreuters.com@thomsonreuters.net))

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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