Politics

FOREX-Euro, yen draw investors as U.S. uncertainty hurts dollar

* U.S. government partial shutdown leaves investors nervous

* Most markets quiet in thin trading before holidays

* Norway's crown plummets to decade-low vs euro

By Tommy Wilkes

LONDON, Dec 24 (Reuters) - The euro and the Japanese yengained in thin trading on Monday as concerns about a partialgovernment shutdown in the United States weighed on investorsentiment and the dollar, although Chinese plans to cut tradetariffs helped lift the mood.

Trading volumes were thin with most global markets prepaingto shut for Christmas, while Japan was closed for a holiday.

After a bruising few weeks in which worries aboutspluttering global growth have knocked markets lower, investorswere reluctant to take on many new risks at the end of the year.

A less dovish than expected Federal Reserve meeting lastweek has heightened fears the U.S. central bank will be raisinginterest rates into a weakening U.S. economy.

A partial U.S. government shutdown, which President DonaldTrump's chief of staff said could continue to Jan. 3, when thenew Congress convenes and Democrats take over the House ofRepresentatives, has added to investor nerves.

The Japanese yen, perceived as a safe place to put money intimes of uncertainty, rose as much as 0.3 percent against thedollar to 110.81 JPY= before settling at 111.09. The yen'sgains in the last six days total more than 2 percent.

The Swiss franc, another currency viewed as a safe-haven,rose versus the dollar CHF= but was unchanged against abroadly stronger euro EURCHF= .

The mood did benefit, however, from China unveiling plans toremove import and export tariffs in 2019 on a range of goods,soothing fears about an ongoing trade dispute with the UnitedStates.

"It's very quiet out there but we are seeing some positivedevelopments," said Alvin Tan, an FX strategist at SocieteGenerale.

The euro EUR= rose 0.1 percent $1.1389 while against abasket of its rivals, the dollar slipped 0.2 percent to 96.808 .DXY .

The Australian dollar, highly sensitive to economicdevelopments in China - its largest trade partner - rose half apercent to as high as $0.7069AUD= as investors welcomedChinese plans to remove trade tariffs.

China's offshore yuan gained 0.3 percent to 6.9069 CNH= .

Scandinavian currencies fell, with the Norwegian crownhitting its lowest in a decade at 10 crowns per euro EURNOK= thanks to the plummeting price of Norway's biggest export, oil,and global growth concerns. The Swedish crown also dropped EURSEK=SEK= .

Despite the dollar's struggles on Monday, analysts note thatend-of-month portfolio rebalancing by investors usually booststhe greenback, particularly in months where U.S. stocks haveperformed poorly.

"If this effect were to hold again, and the risk-off tonecarried on into the end of the year, we might see a further bumpup in the dollar perhaps even to the YTD highs reached inmid-December," MUFG analyst Fritz Louw wrote in a note toclients.

Sterling rose 0.2 percent versus the dollar to $1.2656GBP= , although analysts said that its recent recovery was moreto do with dollar weakness than more positive sentiment towardsthe pound. (Additional reporting by Vatsal Srivastava in Singapore;Editing by Toby Chopra) ((thomas.wilkes@thomsonreuters.com))


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

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More