FOREX-U.S.-China trade talk progress cools dollar rally

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (Recasts; updates prices; adds trade talk news, analyst quotes;changes dateline from LONDON to NEW YORK)

By Kate Duguid

NEW YORK, Feb 12 (Reuters) - The dollar was down modestlymid-morning on Tuesday, cooling what was its longest winningstreak in two years, as investors put money in riskier assets onrising hopes of a breakthrough in U.S-China trade talks.

The dollar had gained for eight consecutive sessions as ofMonday, the most since February 2017, according to Refinitivdata. The dollar index, which measures the currency against abasket of six rivals, was 0.13 percent lower on Tuesday at96.935 .DXY .

Top U.S. officials arrived in the Chinese capital on Tuesdayahead of high-level trade talks as the world's two largesteconomies attempt to hammer out a deal ahead of a March 1deadline to avoid another escalation of tariffs.

Washington is expected to keep pressing long-standingdemands that Beijing make sweeping structural reforms to protectAmerican companies' intellectual property, end policies aimed atforcing the transfer of technology to Chinese companies and curbindustrial subsidies.

"The multiday rally in the U.S. dollar abated amid tentativecooling in global risks," said Joe Manimbo, senior marketanalyst at Western Union Business Solutions.

The dollar ceded ground to the euro EUR= , which was up0.16 percent at $1.1294, and to the British pound GBP= , up 0.3percent, last at $1.2888. Against the Japanese yen, anothersafe-haven currency, the dollar was little changed, slightlyweaker at 110.45 yenJPY= .

The dollar earlier in the session had been trading higher asU.S. lawmakers reached a tentative agreement on border-securityfunding that might help avert another government shutdown, dueto start on Saturday.

At the end of 2018, the dollar was the consensus short tradeamong hedge funds, as traders bet the U.S. Federal Reserve wouldpause in its rate increases and other major economies would growquickly. But while the Fed held interest rates steady lastmonth, the case for buying the euro and the pound has weakenedsteadily. Economic data in Europe has disappointed and Brexitconcerns have dogged the British pound.

"It is remarkable for the dollar to post this kind of rising streak after a dovish Fed last month, and it shows how cautiousinvestors are becoming over the outlook of the global economy,"said Lee Hardman, a currency strategist at MUFG in London.

On Jan. 30, the Fed said it would be "patient" beforeraising rates again and signaled its balance sheet would remainlarger than previously expected.

(Reporting by Kate Duguid and Saikat Chatterjee; Editing bySteve Orlofsky) ((kate.duguid@thomsonreuters.com; +646-223-6118; ReutersMessaging: 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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