* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(New throughout; updates prices, market activity and comments;
new byline, changes dateline, previous LONDON)
By Kate Duguid
NEW YORK, Aug 26 (Reuters) - The U.S. dollar strengthened on
Monday morning, recovering from overnight losses after the
United States and China sought to ease trade war tensions.
President Donald Trump, on the sidelines of the G7 summit of
world leaders in France, said Chinese officials had contacted
U.S. trade counterparts overnight and offered to return to the
negotiating table. Vice Premier Liu He, who has been leading the
talks with Washington, said China was willing to resolve the
trade dispute through "calm" negotiations. In overnight trade prior to these remarks, China's yuan had
fallen to an 11-year low in the onshore market and a record low
offshore and the U.S. dollar fell to a 2-1/2 year low against
the Japanese yen JPY= .
The currency market had been reacting to Trump's
announcement on Friday of an additional 5% duty on $550 billion
in targeted Chinese goods, hours after Beijing unveiled
retaliatory tariffs on $75 billion worth of U.S. products,
sending stocks into a tailspin and investors rushing for the
safety of bond markets. Trump on Monday sought to limit the fallout and smooth
tensions, helping the yuan come off its lows. The dollar index
.DXY recovered, last up 0.33% at 97.965.
"It has been a bit of a roller coaster. We had the dollar
opening up quite weak in Asia last night. Then a number of
things have happened to reverse that including dollar/CNH
pushing higher," said Daniel Katzive, head of foreign exchange
strategy for North America at BNP Paribas (PA:BNPP).
"Of course, most importantly," he said, were "the more
optimistic comments from the president on the China trade
relationship."
In China's onshore market, the yuan CNY=CFXS fell to
7.1540 per dollar, the lowest since February 2008.
In the offshore market, the yuan CNH= slid to as low as
7.1858 yuan, the weakest since international trading in the
currency began in 2010, before recovering to 7.1635 yuan - down
0.43% on the day - after Trump's upbeat comments.
In a sign that some calm had returned to markets, the
Japanese yen - which investors regard as a safe-haven - fell
0.57% to 105.99 JPY= , having earlier hit a 2-1/2-year high of
104.44.
"I think market uncertainty around trade is going to remain
very elevated in the best case scenarios. It should ultimately
mean that currency pairs like dollar/yen continues to push lower
because Japanese investors have big exposures to global markets
and if markets are more volatile, they'll be more cautious about
maintaining their FX exposure," said Katzive.