Forex - Yuan Edges Up on Trump’s Positive Comments on Trade, U.S. Dollar Flat

12/02/2019 05:29:59 Forex

The yuan traded slightly higher on Tuesday in Asia as U.S. President Donald Trump’s positive comments on trade put a bid under the Chinese currency.

On Monday, Trump said in Texas that his administration is seeking “great deals on trade” and does not want China to have a hard time.

Comments by White House adviser Kellyanne Conway, in which he said Trump wants to meet with Chinese President Xi “very soon” also lifted investor sentiment.

A new round of trade negotiations kicked off in Beijing this week as the world’s two largest economies try to reach a deal before a March 1 deadline of tariff hikes.

Preparatory talks began on Monday ahead of Thursday and Friday's higher principal-level discussions led on the US side by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, who will meet Chinese Vice-Premier Liu He.

The People's Bank of China (PBOC) set the yuan reference rate at 6.7765 vs Monday's fix of 6.7495.

The USD/CNY pair dropped 0.1% to 6.7862 by 12:18 AM ET (05:18 GMT).

The Australian dollar, the Chinese proxy, also rose 0.2% against the U.S. dollar.

The Aussie dollar’s gain came despite data earlier in the day showed the country’s home loan dropped 6.1%, a big miss compared to the expected 2% fall.

The U.S. dollar index that tracks the greenback against a basket of other currencies were little changed at 96.877. The dollar index hit two-month highs on the previous day, with weakness in the pound and uncertainty surrounding the Sino-U.S trade tensions cited as supporting safe-haven assets.

The GBP/USD pair fell close to 1% on Monday following data showing the U.K. economy grew just 0.2% in fourth quarter last year, well below the 0.6% posted for the third quarter and missing expectations for a 0.3% increase.

The pair last traded at 1.2863 on Tuesday, up 0.1%.

Elsewhere, the USD/JPY pair gained 0.2% to 11.53. The weaker yen was cited as a catalyst for the buying in Japanese stocks today. The Nikkei 225 last traded at 20,849.50, up 2.5%.