Dollar stable, markets turn to Trump-Xi catalysts

SINGAPORE (Reuters) – The dollar was looking Friday ahead of a meeting of US and Chinese leaders to discuss trade disputes that could be a catalyst for the short-term direction of riskier assets such as equities. and safe havens, including the greenback and the yen.

The US currency was shaken this week by growing expectations that the Federal Reserve would slow its rate hikes, which is credited in remarks made Wednesday by President Jerome Powell.

However, the dollar has managed to stem all the massive sales, partly thanks to the strength of the US economy and a security offer that is reinforced by Sino-US trade tensions and the slowdown in growth abroad.

It remained stable in Asian trade at the beginning, with a .DXY index measuring its value against six competitors slightly up to 96.77.

The focus is now on a planned meeting between US President Donald Trump and his Chinese counterpart Xi Jinping at the G20 summit in Buenos Aires from November 30 to December 10. 1.

While contentious trade and other topics should be discussed, the markets remain nervous, Trump having sent Thursday conflicting signals about the prospects of a trade deal with Beijing.

"If we watch a truce, the Australian dollar and the kiwi will behave exceptionally well. We see a lot of potential in the cross as Aussie / yen who would benefit from a risk in the event of a move, "said Nick Twidale, director of operations at Rakuten Securities.

"If tariffs on Chinese imports remain at 10 percent, the dollar should weaken if the risk is high," he said.

Trump has announced its intention to significantly increase current tariffs by 10% on Chinese imports by next January, which would significantly worsen the trade war between heavyweights in the economy.

The Chinese economy is already under pressure, and a survey released Friday revealed the vast growth of its manufacturing sector slowed for the first time in more than two years in November, due to the contraction in new orders.

Investors in dollars were also alert to any change in US monetary policy.

In the night, the minutes of the November 7-8 Fed meeting indicated that a further rise in interest rates was warranted. But Fed officials have also left open debate about when the US central bank could suspend its monetary tightening and how it would pass these plans on to the public.

The Fed is likely to raise interest rates by 25 basis points in December, the fourth increase of the year.

For 2019, the market now expects a single rate hike, according to the CME Group 's FedWatch tool, lower than the Fed' s three – year forecast of increases over the course of the year.

On Wednesday, Powell said the Fed's key rate was now "just below" neutral rate estimates, which investors have interpreted as a sign that the Fed's three-year tightening cycle coming to an end.

"The Fed basically recognized that if things went really bad, it was ready to take a break from its monetary tightening process," said Twidale.

The Yen Yen = was quoted at 113.41, a slight increase against the dollar. Analysts expect the dollar / yen to remain bullish because of the diverging monetary policies of the Fed and the Bank of Japan.

The EUR = euro remained stable at 1.1390 ​​USD, after rising over the past two sessions as the dollar faltered on Powell's comments.

Elsewhere, the pound sterling traded at 1.2779 USD, losing 0.1% against the greenback. Traders remain bearish on the British pound betting that British Prime Minister Theresa May will fail to get approval of her agreement on Brexit in a torn parliament.

Australian dollar AUD = lost 0.08% to 0.7315 USD based on weak Chinese PMI data.