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FOREX-Dollar in the doldrums; US politics, Fed minutes eyed

Published 17/08/2020, 01:43
FOREX-Dollar in the doldrums; US politics, Fed minutes eyed
USD/JPY
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USD/KRW
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USD/IDR
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DX
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* Dollar range-bound as markets look to U.S. politics and
Fed
* U.S.-China talks postponement welcomed, but uncertainty
looms
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, Aug 17 (Reuters) - The U.S. dollar began Monday
where it left off last week, caught between pressure from
worries about the lagging U.S. economic recovery and support
from rising U.S. bond yields and safe-harbour demand.
A boost to sentiment from the postponement of the U.S-China
trade deal review - which leaves the deal intact - was muted by
uncertainty, ahead of a week a week that includes Federal
Reserve minutes and the Democrats' nomination convention.
Against a basket of currencies =USD the dollar traded
under gentle pressure at 93.039 on Monday, roughly in the middle
of the range it has held since hitting a two-year low at the end
of July.
The risk-sensitive Australian dollar AUD=D3 inched up to a
three-session high of $0.7194, but also remained contained in
the channel it has traded in for a week. AUD/
Other Asian currencies, such as the won KRW= and rupiah
IDR= edged lower, while the kiwi NZD=D3 remained weighted at
$0.6534 by last week's dovish language from the central bank.
The yen JPY= was steady at 106.54 per dollar, having
dipped last week as a jump in U.S. yields drew Japanese
investment to U.S. Treasuries. US/

REVIEW DELAY
The United States and China delayed a Saturday review of
their Phase 1 trade deal, people familiar with the plans told
Reuters, citing scheduling conflicts. "That's good news in the sense that it's something we can
place on the back burner for now," said National Australia Bank
senior foreign exchange strategist Rodrigo Catril.
"But there are other uncertainties coming up that need to be
resolved," he said, pointing to U.S. politics as a presidential
election looms, and new virus hot spots in Europe that could
challenge the perception that the euro is on an uptrend.
U.S. President Donald Trump also flagged a broadening of his
pressure on Chinese tech firms such as e-commerce giant Alibaba
Group Holding Ltd BABA.N . The yuan CNH= , often a barometer of relations between the
two countries, was unmoved in offshore trade on Monday morning,
and last traded at 6.9364 per dollar.

ELECTION DELAY
Elsewhere, in Japan, data showed the world's third-largest
economy suffered its acutest economic contraction on record in
the second fiscal quarter as the COVID-19 pandemic crushed
business and consumer spending. New Zealand delayed a general election by a month as it
grapples with a new outbreak of the pathogen, while there have
been flare-ups in infections in South Korea, Spain and France.
The euro EUR=EBS and sterling GBP=D3 were steady in
Asia, with the euro last buying $1.1844 and sterling $1.3095.
On the horizon, the Democratic national convention in the
United States begins on Monday, and is something of a starting
gun for the final sprint to the November election. It culminates
in a speech from presumptive nominee Joe Biden late on Thursday.
Markets are also on edge ahead of the release of Federal
Reserve minutes on Thursday, looking for any hints of a possible
change to the central bank's guidance at its next meeting in
September.
Investors are expecting more tolerance in the Fed's approach
to inflation, said Chris Weston, head of research at Melbourne
brokerage Pepperstone.
"The bond market is key here and if the Fed can drive down
real yields then the dollar will follow, and gold will rally -
and vice versa," he said.

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