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Jul 13, 2018

Currencies I CNBC

cnbc.com

Dollar hits 2-week high on US-China trade fears

CNBC




Dan Kitwood | Getty Images
The dollar rose on Friday to a two-week peak against a basket of currencies after data showing a record Chinese trade surplus, which may add fuel to U.S.-China trade tensions, spurring more investors to pile into the safety of the greenback.
Upbeat comments on the U.S. economy from Federal Reserve Chairman Jerome Powell also stoked demand for the dollar, analysts said.
The yen fell to a six-month trough against the greenback. The euro and yuan also weakened against the U.S. currency.
"It's hard to see what's going to dethrone the dollar," said Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Investments in Boston.
"Trade war concerns amplify the downside risk on global growth. That tends to be positive for the dollar and puts a drag on other currencies," Upadhyaya said.
In afternoon trading, an index that tracks the dollar against the yen, euro and four other currencies fell 0.08 percent to 94.72 after touching 95.241 earlier, which was the highest since June 29.
The yen hit a six-month low at 112.79 yen per dollar before recovering to 112.29 yen. The euro gained 0.07 percent to 1.1679, while the yuan fell half a percent in offshore markets to as low as 6.7250, near an 11-month trough of 6.7326 on July 3. U.S.
Treasury Secretary Steven Mnuchin said on Thursday that the United States and China might reopen trade talks, briefly easing concerns about the trade dispute. But data showing China's trade surplus with the United States swelled to a record in June could further inflame tensions.
U.S. President Donald Trump this week pledged to impose tariffs on $200 billion more in Chinese imports. Beijing has vowed to retaliate. Escalating trade tensions have not dented the U.S. economy, which on is its second longest expansion on record.
On Thursday, Fed chief Powell said in a Marketplace radio interview he believes the U.S. economy remains in a "good place," with recent government tax and spending programs likely to boost growth for perhaps three years.
"Powell's comments have provided more upward pressure on the dollar overnight into this morning," Upadhyaya said.
The Fed will release its semiannual report on monetary policy at 11 a.m. before Powell's testimony before Congress next Tuesday and Wednesday.