* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Updates prices, adds Foley quote, adds graph)
By Elizabeth Howcroft
Nov 5 (Reuters) - Trade-oriented currencies including the
Australian dollar surged on Tuesday, with the Chinese currency
poised for its biggest daily jump in nearly three months on
increasing signs that Beijing and Washington are inching closer
to a trade deal.
A decision by the Chinese central bank to trim lending rates
by only 5 basis points also boosted general risk appetite, with
the perceived safe-haven Japanese yen and the Swiss franc
weakening by a third of a percentage point.
China is pushing U.S. President Donald Trump to remove more
tariffs imposed in September as part of a "phase one" U.S.-China
trade deal, which is expected to be signed later this month,
people familiar with the negotiations said. "(The market thinks) we are clearly very close to achieving
phase one of the trade deal and therefore the anticipation is
that growth in China might improve, and therefore we might see
improvement in the renminbi," said Jane Foley, a senior FX
strategist at Rabobank.
The yuan traded in the offshore market jumped as much as
0.7% to its strongest since Aug. 5 at 6.9867 CNH=D3 . The
onshore yuan also posted its strongest close since Aug. 2.
CNY=CFXS . The currency held its gains even after China's central bank
cut its one-year medium-term lending facility (MLF) rate for the
first time since early 2016, though it opted for a 5 bps cut
that Commerzbank called "tiny" "It's a very small move but it does beg the question of
whether or not the PBoC are going to be easing interest rates
again," said Foley.
China and the U.S. have imposed tariffs on each other's
goods in a trade war that has dragged on for 16 months and
raised the spectre of a global recession. Resolving the row
would boost riskier assets, ease concern about the economic
outlook and reduce the need for aggressive monetary easing.
Foley added that any progress in phase one of a trade deal
begs the question of a second phase, as the first leaves a lot
of "unfinished business".
The U.S. dollar was broadly flat against a basket of
currencies .DXY but advanced 0.3% against the safe-haven yen
.JPY and Swiss franc CHF=EBS .
Kit Juckes, head of FX strategy at Société Générale, said
the agreement would probably mark a truce rather than peace but
added that "the chance of getting a first-stage deal seems to be
quite good."
The optimism spilled over into other currencies, with the
Australian dollar AUD=D3 close to recent three-month highs and
the highest versus the yen since the end of July EUDJPY=EBS .
It wasn't much moved after the central bank left monetary policy
unchanged, as expected. The kiwi dollar rose 0.3%
NZD=D3 .
The Norwegian and Swedish crowns also rose versus both
dollar and euro NOK=D3 SEK=D3 .
The euro was slightly down against the dollar EUR=EBS . It
rose 0.24% versus the yen EURJPY=EBS .
Juckes said the euro would be one of the last currencies to
benefit from improved risk sentiment, noting that Monday's data
showing Polish manufacturing activity in its sharpest downturn
in 10 years had taken the wind out of the euro's sails.
Central European states such as Poland are a key market and
investment destination for euro zone companies.
yuan https://tmsnrt.rs/2Nk0fFS
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