Yen gains as report casts doubts on trade deal
By Karen Brettell
NEW YORK, Nov 18 (Reuters) - The safe haven Japanese yen gained on Monday after a media report dashed fresh hopes that the United States and China are close to reaching a trade deal.
CNBC reported that China is pessimistic about reaching a trade deal due to U.S. President Donald Trump’s reluctance to roll back tariffs.
It came after Chinese state media Xinhua said on Sunday that China and the United States had "constructive talks" on trade in a high-level phone call on Saturday.
“I think the market is overreacting to this,” said Mazen Issa, senior FX strategist at TD Securities in New York. “There was nothing substantive that came out that suggested the deal is off or on, it’s just the ebb and flow” of the news each day.
Investors are looking for signs that tariffs imposed on each country’s goods will be rolled back, as they are viewed as harming global economic growth.
Another round of U.S. tariffs on Chinese goods is scheduled to take effect on Dec. 15.
The yen JPY= gained to 108.64, from 109.02 before the CNBC report was released.
The euro EUR= reached at 10-day high against the greenback at 1.1063.
The single currency has rebounded from a more than two-year low of 1.0877 on Oct. 1 on optimism a trade deal will be signed.
"Market participants remain optimistic that a partial U.S.-China trade deal will be signed soon and have welcomed tentative signs of economic improvement outside of the U.S., especially in the euro zone, both of which are eroding the relative appeal of the U.S. dollar," Lee Hardman, currency analyst at MUFG, said.
Still analysts say that the European and global economies need to show more strength to sustain a euro rally.
“One of the things the euro is, is a pro-cyclical or growth currency and so when global growth performs well you tend to see the euro perform well, but we’re not there yet,” said TD's Issa.
Sterling, meanwhile, was boosted by expectations that the Conservative (Tory) Party could win a majority in the Dec. 12 election.
It was also supported by British Prime Minister Boris Johnson saying that all Tory candidates in the election have pledged to back his Brexit deal, which could open the door to getting the agreement through parliament.
Currency bid prices at 9:42AM (1442 GMT)
U.S. Close Previous Session
YTD Pct Change
(Editing by Karen Brettell; Additional reporting by Olga Cotaga in London; Editing by Steve Orlofsky)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.