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CORRECTED-FOREX-Yen slips, yuan advances as U.S.-China trade ceasefire lifts investor mood

Published 02/07/2019, 08:50
CORRECTED-FOREX-Yen slips, yuan advances as U.S.-China trade ceasefire lifts investor mood
USD/JPY
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USD/CHF
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US10YT=X
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DXY
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(Corrects title of analyst in tenth paragraph)
* Yen, Swiss franc sag after Trump, Xi agree to resume talks
* Offshore yuan hits 2-mth high but soft China data tempers
gains
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Shinichi Saoshiro
TOKYO, July 1 (Reuters) - The yuan gained and the safe-haven
yen slid against the dollar on Monday as appetite for
risk-sensitive currencies improved after the United States and
China agreed to restart their troubled trade talks.
The dollar was up 0.3% at 108.235 yen JPY= after going as
high as 108.510.
In offshore markets, the Chinese yuan CNH=D4 initially
gapped up to as much as 6.8166 per dollar, its highest level
since May 9. It later pared gains to 6.8381 but was still up
0.5%.
After meeting Chinese President Xi Jinping in Japan on
Saturday on the sidelines of Group of 20 summit, U.S. President
Donald Trump said he would hold back on new tariffs and that
China will buy more farm products. Trump also said the U.S. Commerce Department would study
over the next few days whether to take Huawei HWT.UL off the
list of firms banned from buying components and technology from
U.S. companies without government approval.
"Most of the discussions that took place between the United
States and China at the G20 had already been anticipated, but
the mention of Huawei was a bit of a surprise," said Yukio
Ishizuki, senior currency strategist at Daiwa Securities.
"There were more dollar short positions than expected, and
these are being covered. But once these shorts are covered, the
dollar's advance is likely to slow ahead of the non-farm jobs
report."
Economists polled by Reuters expect U.S. non-farm payrolls,
which will be released on Friday, to have risen to 160,000 in
June from 75,000 in May.
Other key U.S. data due this week include Wednesday's
Institute of Supply Management's (ISM) non-manufacturing
activity index for June.
"The focus now shifts to U.S. fundamentals with the G20
over," said Koji Fukaya, president at Office Fukaya Consulting.
"Some Fed officials curbed easing views recently and the
data will help the market get a clearer picture of whether the
Fed stands poised to cut rates this month."
At a June 18-19 policy meeting the Federal Reserve opened
the door for possible interest rate cuts later this year. But
comments last week from central bank officials, including Chair
Jerome Powell, and the weekend agreement to resume Sino-U.S.
trade talks have cooled expectations for aggressive rate cuts.
The Swiss franc, another safe-haven currency, fell 0.5% to
0.9808 franc to the dollar CHF= .
The yuan lost some of its earlier momentum after a
Caixin/Markit Manufacturing Purchasing Managers' Index (PMI)
showed that China's factory activity unexpectedly shrank in June
as domestic and export demand faltered. The Australian dollar AUD=D4 , sensitive to the economic
fortunes of China, the country's largest trading partner, was
down 0.25% at $0.7007.
Supported by the greenback's rise against the yen, the
dollar index .DXY against a basket of six major currencies
added 0.22% to 96.337.
The euro fell 0.15% to $1.1351.
The Turkish lira TRYTOM=D4 was up 0.75% at 5.7409 per
dollar after Turkish President Tayyip Erdogan said over the
weekend that the United States did not plan to impose sanctions
on Ankara for buying Russian defence systems. The U.S. Treasury 10-year yield US10YT=RR was up about 3
basis points at 2.030%, putting some distance between a
2-1/2-year low of 1.974% plumbed on June 20.

(Editing by Sam Holmes, Shri Navaratnam & Kim Coghill)

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