* Weak U.S. producer prices support another Fed interest
rate cut
* Pound slips on reports of Brexit talks close to breakdown
(Updates with afternoon trading)
By Saqib Iqbal Ahmed
NEW YORK, Oct 8 (Reuters) - The dollar fell against the
safe-haven Japanese yen on Tuesday, pressured by renewed worries
about trade, but the greenback strengthened against other
currencies as Federal Reserve Chair Jerome Powell refrained from
committing to more rate cuts even after data showed an
unexpected drop in U.S. producer inflation.
The dollar came under pressure after the U.S. State
Department said it has imposed visa restrictions on Chinese
government and Communist Party officials it believes responsible
for detention or abuse of Muslim minorities in Xinjiang
province.
On Monday, the U.S. Commerce Department blacklisted Chinese
companies over Beijing's treatment of predominantly Muslim
ethnic minorities, and President Donald Trump said a quick trade
deal was unlikely. The dollar fell 0.18% to 107.09 yen. The Japanese currency
tends to benefit during geopolitical or financial stress as
Japan is the world's biggest creditor nation.
The latest developments come at a critical juncture in the
15-month trade war between Washington and Beijing, which has
roiled markets. Top-level talks are scheduled to resume on
Thursday and Friday, when Chinese Vice Premier Liu He meets with
U.S. Trade Representative Robert Lighthizer and Treasury
Secretary Steven Mnuchin in Washington. "This obviously is not a good precursor before any type of
negotiations. There is some trepidation in terms of market
expectations (for a deal)," said Minh Trang, senior currency
trader at Silicon Valley Bank in Santa Clara, California.
"It feels a little bit like a risk-off day," he said.
Against a basket of six currencies the greenback was 0.15%
higher, after Fed chief Powell, in comments to the National
Association of Business Economists, did not commit to further
rate cuts, noting that the next FOMC meeting is several weeks
away. "His tone and the reminder that the next FOMC meeting was
still “several weeks away” suggests that an October rate cut is
far from the done deal that the futures market appears to
believe," Paul Ashworth, chief U.S. economist at Capital
Economics said in a note.
U.S. producer prices unexpectedly fell in September, leading
to the smallest annual increase in nearly three years. This
could give the Federal Reserve room to cut interest rates again.
Meanwhile, sterling touched a one-month low against the euro
on as investors took fright at reports that Brexit talks between
Britain and the European Union were close to breaking down.
The pound was 0.56% lower against the greenback.
US dollar and CFTC https://tmsnrt.rs/2nvttrw
Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>