Aussie slips towards 10-year low as US-China trade hopes ebb

The Australian dollar, often seen as a proxy bet on the Chinese economy, fell 0.31per cent to US$0.67095, about a third of a cent above its 10-year low of US$0.66775 hit on August 7. — Reuters pic
The Australian dollar, often seen as a proxy bet on the Chinese economy, fell 0.31per cent to US$0.67095, about a third of a cent above its 10-year low of US$0.66775 hit on August 7. — Reuters pic

TOKYO, Aug 30 — The Australian dollar slipped towards a 10-year trough while the yen hovered off its lows today, as renewed hope that China and the United States could get their negotiations back on track began to fade.

The US currency was also supported by investors’ month-end rebalancing needs, which has helped lift the dollar index to its highest level in a month.

The index is last up 0.1per cent at 98.555.

The Australian dollar, often seen as a proxy bet on the Chinese economy, fell 0.31per cent to US$0.67095 (RM2.83), about a third of a cent above its 10-year low of US$0.66775 hit on August 7.

Adding to the Aussie’s woes, the country’s building approvals unexpectedly plunged to a six-year low.

The New Zealand dollar dropped 0.30per cent to a four-year low of US$0.6290. It is the worst performing G10 currency this month with a fall of 4.1per cent.

The yen held flat at 106.49 per dollar, off this week’s low of 106.68 hit the previous day.

Risk assets got a mild lift yesterday after China’s commerce ministry said Beijing and Washington were discussing the next round of face-to-face talks in September, but the effect was short-lived.

Washington is due to start imposing 15per cent tariffs on US$125 billion worth of goods from China on Sunday, affecting a vast number of consumer items from smart speakers to sneakers.

Investors fear the intensifying trade dispute could lead the US economy into a recession, a scenario that has become more of a reality this week after the US bond yield curve inverted, a highly reliable indicator of a recession.

“The talking point is still the US yield curve inversion and whether the US economy heads into a recession...In short, the atmosphere is not so good,” said Bart Wakabayashi, Tokyo branch manager of State Street.

In addition, political risks from the UK to Hong Kong and the Middle East added to risks for the global economy and kept many investors on edge.

Despite the dollar’s rebound against the yen this week, the Japanese currency is the best performer among major currencies this month, rising 2.2per cent so far.

The second best was the Swiss franc, which has gained 0.7per cent so far this month, to 0.9879 per dollar.

“There are so many geopolitical risk factors now. Not to mention US-China trade conflicts, we have Brexit, Hong Kong and the Middle East. So we should expect the yen to jump from time to time,” said Minori Uchida, chief currency analyst at MUFG Bank.

The euro eased 0.12per cent to US$1.1043, near a four-week low of US$1.1042 touched yesterday, hurt by a sluggish euro zone economy and likely monetary easing from the European Central Bank (ECB) next month.

Christine Lagarde, the ECB’s next president, said yesterday the central bank still has room to cut interest rates if needed, although this may pose financial stability risk.

German inflation slowed in August and unemployment rose, data showed yesterday, adding to signs that Europe’s largest economy is running out of steam and cementing expectations of a new ECB stimulus package next month.

Sterling traded at US$1.2183, on course to post its first weekly loss in three weeks on growing worries about a no-deal Brexit at the end of October.

British Prime Minister Boris Johnson suspended parliament for more than a month to dodge a possible no-confidence vote and take Britain out of the European Union on the October 31 deadline. — Reuters

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