China Taps the Brakes

Daily Forex Signals – China made it easier for traders to bet the yuan will fall in value, a move analysts said showed that the country’s central bank wants to slow any further rally in the currency.

China Taps the Brakes – Dollar Edges Higher as Stimulus Talks Stumble; Losses Loom

no deal between UK and EU – The dollar edged higher in early European trade Monday, with negotiations over the latest stimulus measures in the U.S. seemingly in difficulties as the election approaches.

China’s exports imports fell in March

At 2:55 AM ET (0655 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 1% at 93.108, regaining a little ground after recording its biggest loss in six weeks on Friday, falling to a near-three-week low of 92.997.

Dollar Up as U.S. China Tensions Escalate

Elsewhere, EUR/USD dropped 0.1% to 1.1814, USD/JPY was down 0.1% at 105.50, GBP/USD was flat at 1.3050, while the risk-sensitive AUD/USD fell 0.2% to 0.7227.

The dollar had been hard hit Friday on hopes that a deal for new U.S. stimulus would be reached, reducing the need for this safe haven currency, after the Trump administration proposed a new $1.8 trillion package.

EUR/USD to Snap 2-Week Losing Streak

However, this offer ran into opposition from both sides, with the Democrats saying it was not comprehensive enough and the hard-line Republicans worried about the extent that this would increase the country’s debt pile.

Signal Dollar Down Amid Rising U.S.- China Tensions

That said, this rebound in the dollar, limited as it is, may be short-lived if Goldman Sachs (NYSE:GS) is to be believed. The influential investment bank suggested the greenback could well slump to its lows of 2018–when the dollar index fell below 89–on the rising likelihood of Joe Biden winning the U.S. election and progress on a coronavirus vaccine.

China’s Digital Yuan

“A ‘blue wave’ U.S. election and favorable news on the vaccine timeline could return the trade-weighted dollar and DXY index to their 2018 lows.”

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Elsewhere, the Chinese yuan weakened Monday after the People’s Bank of China said it will lower the reserve requirement ratio for financial institutions when conducting some foreign exchange forwards trading, a move which is seen keeping the yuan’s strength in check.

The yuan hit a 17-month high on Friday, having gained more than 6% against the dollar since late May. At 2:55 AM ET, USD/CNY traded 0.3% higher at 6.7160.

Turkey’s central bank raised interest rates in September, for the first time in two years, to provide a boost to a currency which is down 34% year-to-date. Forex traders smell weakness as Turkey has used up a lot of its foreign exchange reserves during the coronavirus pandemic, and further losses look likely.

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