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Dollar Falls on U.S.-China Trade War Truce, Aussie Gains After RBA

12/4/2018, 3:44:52 PMBasics of Trading
Dollar Falls on U.S.-China Trade War Truce, Aussie Gains After RBA

The dollar fell on Tuesday in Asia as traders fled the greenback in favour of risk-sensitive currencies on easing U.S.-China trade worries.

The U.S. dollar index that tracks the greenback against a basket of other currencies last traded at 96.667, down 0.31%.

The index fell after U.S. President Donald Trump and his Chinese counterpart Xi Jinping promised to halt the introduction of new tariffs for 90 days, according to Chinese Foreign Minister Wang Yi.

Meanwhile, the AUD/USD pair was up 0.2% to 0.7375 after the Reserve Bank of Australia kept the official cash rate on hold for a 28th consecutive month at 1.5% as expected.

The NZD/USD pair also gained 0.5% to 0.6961.

Citing various economists, Bloomberg said it expects the central bank to keep the rate on hold until at least the fourth quarter of 2019.

The USD/CNY pair declined 0.6% to 6.8420 following the trade news.

Yi Gang, governor of the People’s Bank of China, said in an interview with the state-owned China Finance magazine that the central bank would keep its monetary policy flexible, but tools he described as a "slow release of air" and "soft landing" must be used when the economy begins overheating.

The central bank would also promote the opening up of China’s financial industry to technology to enhance international confidence in the yuan, said Yi.

Separately, the China Securities Journal said interest rate spread between China and the U.S. is stabilising at a low level, and that could lead to a stable yuan, but the USD/CNY pair is unlikely to rise above 7.0000 this year.

The People's Bank of China (PBOC) set the yuan reference rate at 6.8939 vs the previous day's fix of 6.9431.

Elsewhere, the USD/JPY pair slipped 0.5% to 113.11