U.S. sparks risk-off move by backing Hong Kong; dollar flat
By Elizabeth Howcroft
LONDON, Nov 28 (Reuters) - The dollar was little changed in early London trading on Thursday as a mild overnight risk-off move, sparked by the United States and China clashing over Hong Kong, subsided.
After the U.S. passed legislation backing pro-democracy protesters in Hong Kong, China warned that it would take "firm counter-measures" if the U.S. continued to interfere in Hong Kong, saying that the legislation was "doomed to fail".
The dollar index .DXY was last down less than 0.1%, trading within narrow ranges, while the Japanese yen - a perceived safe haven - was up around 0.2% versus the dollar JPY=EBS.
The Swiss franc was up around 0.1% versus the dollar CHF=EBS.
Heightened discord between the United States and China risks jeopardising negotiations around the "phase one" trade deal - a proposed preliminary deal to end the tit-for-tat tariff war between the world's two largest economies.
"The moves have been quite modest because we're still waiting to see what China's response is - what they've said so far is quite vague," said Adam Cole, chief currency strategist at RBC Capital Markets.
"They've not gone so far as to say explicitly that this threatens the phase one trade deal, which is clearly what markets are worrying about, and for that reason the reaction so far has been quite mild," he said.
The offshore yuan was down 0.2% versus the dollar, still trading within the week's ranges.
The trade-exposed Australian dollar was also down versus the U.S. dollar AUD=D3, with losses due to the risk-off mood compounded by weak domestic data.
Record-low volatility and the United States' Thanksgiving holiday mean traders are expecting a quiet day in markets.
Euro zone consumer confidence data for November is due at 1000 GMT and German CPI data for November is due at 1300 GMT. Spanish pricing data held no surprises and did not move the market.
RBC's Cole said the hurdle was quite high for such data to move markets.
(Reporting by Elizabeth Howcroft; Editing by Alison Williams)
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