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Dollar bounces back, yuan slips after China appears to keep a tab on its currency By Reuters

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© Reuters. FILE PHOTO: FILE PHOTO: U.S. dollar notes are seen in this picture illustration

By Hideyuki Sano

TOKYO (Reuters) – The dollar bounced back from a three-week low on Tuesday as market players bought it back, particularly against riskier peers, after Chinese authorities appeared to be trying to put a brake on recent rises in the yuan.

The Australian dollar lost about a half percent, taking an additional hit from media reports China has halted coal imports from the country as their relations deteriorate.

But overall risk sentiment was propped up by hope that former U.S. Vice President Joe Biden will beat President Donald Trump in the Nov. 3 U.S. election and push forward with a large stimulus to shore up a pandemic-hit economy.

The rose 0.1% to 93.190 (), trying to extend its rebound from Friday’s near-three-week low of 92.997, with the euro falling 0.17% to $1.1794 ().

The fell 0.1% to 6.7500 per dollar , after the central bank set a weaker than forecast midpoint, offseting any boost from strong Chinese trade data.

China’s central bank announced on the weekend the removal of reserve requirements for some foreign exchange forwards, cementing speculation Beijing wants to curb the yuan’s strength.

“Biden trades have been hot in the last several days, in which people sell the dollar, particularly against currencies that have suffered under Trump, like the yuan, the Mexican peso or the Canadian dollar,” said Masaru Ishibashi, joint general manager of Sumitomo Mitsui (NYSE:) Bank.

“But if you think that Beijing is sending a message to rein in the yuan’s strength, then it might make sense to unwind that trade for now.”

The Mexican peso also fell 0.4% to 21.270 to the dollar while the Canadian dollar dipped 0.1% to C$1.3124 per dollar .

A Biden victory is seen as negative for the dollar also partly because his pledge to increase corporate tax would reduce returns from investments in the United States, putting pressure on the dollar even against safe-have currencies such as the yen and the Swiss franc.

The yen moved little at 105.43 per dollar while the Swiss franc traded at 0.9102 to the dollar , near its highest in three weeks.

Sterling traded above the key $1.30 level as hopes for a Brexit deal offset concern about pressure on the economy from new coronavirus restrictions British Prime Minister Boris Johnson has announced.

The pound stood near its strongest levels in two weeks against the euro, which changed hands at 0.9043 pound ().

On the other hand, the Australian dollar dropped as much as 0.6% to $0.7165 , not helped by media reports China has stopped taking shipments of Australian coal.

“Despite the positive risk sentiment, the appears to have been well contained by further indications that Chinese imports of met and thermal coal have been banned. This is important given that 22% of Australian thermal coal exports went to China in the last year and 28% of met coal,” said Rob Rennie, head of financial market strategy at Westpac.

“We stick to the view that the near-term risks for the A$ are lower and a dip below 0.70 through end October/ early November is still possible.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Dollar holds small gains as markets buffeted by COVID-19 woes, election uncertainty By Reuters

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By Tom Westbrook

SINGAPORE (Reuters) – The dollar clung to small gains on Tuesday as the greenback’s safe-haven appeal was burnished by worries about a second wave of COVID-19, which drove the steepest stock market selloff in a month and underpinned a bond rally.

The United States, Russia and France all hit new daily records for coronavirus infections and overnight the S&P 500 index () fell 1.9% and Germany’s DAX () dropped 3.7%.

Moves in the currency market were more muted, though the () lifted about 0.3% overnight and held there early in Asia trade while regional equities fell.

The largest gains for the greenback on Monday came against the (), up 0.4%, which was hit by a drop in German business confidence, and a 0.7% rise on the Canadian dollar as oil prices slumped.

The yuan nursed a 0.5% loss as Sino-U.S. tensions flared over arms sales to Taiwan.

“The dollar is broadly stronger, but not massively,” said National Australia Bank (OTC:) senior FX strategist Rodrigo Catril.

Structural forces, like low real yields, have held back further gains, he added, and so has a wait-and-see approach to the U.S. election.

“I think many would probably remember the bad experiences we had going in to the Trump-Clinton election (in 2016),” said Catril.

“If you had a position on, you would have been whipsawed big time. I think the strategy this time is to travel light, and to choose the opportunity on the day rather than take on a very, very strong position going into the election.”

The usually risk-sensitive Australian and New Zealand dollars dipped only marginally overnight and were firm in the early part of the Asia session. [AUD/]

The Japanese yen did not move much as U.S. equities sold off, and was steady at 104.76 per dollar in Asia. Sterling slipped overnight but was back above $1.30 on Tuesday.

A week out from polling day, national polls give Democrat Joe Biden a solid lead but the contest is much tighter in battleground states that could decide the outcome.

Biden and President Donald Trump both spent Monday campaigning in Pennsylvania.

Analysts regard a Biden victory, and especially Democrat control of the Senate, as negative for the dollar since it is expected to deliver big stimulus spending that would boost investor sentiment and drive demand for riskier currencies.

Positioning data showed long bets on the yen shrank for a fourth straight week last week, as investors wagered on a Biden victory, though short bets against the yen also fell – pointing to heightened uncertainty around the vote.

The euro nursed losses at $1.1809, having borne the brunt of worries about fresh coronavirus lockdowns and slipping after the German Ifo business climate index fell by more than expected and for the first time in six months in October.

Traders are waiting for any news to emerge from a meeting of China’s Communist Party leaders to set the next five-year plan, while keeping a wary eye on the potential fallout from U.S. arms sales to Taiwan.

China said it will impose sanctions on Lockheed Martin (N:), Boeing Defense (N:) and Raytheon (N:).

Elsewhere the Turkish lira hit a record low on Monday amid a slew of geopolitical concerns and as a surprise central bank decision to keep its policy rate on hold last week reveberates through markets.





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Dollar Down, U.S.-China Tensions Rise By Investing.com

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© Reuters.

By Gina Lee

Investing.com – The dollar was down on Tuesday morning, giving up earlier gains. Tensions between the U.S. and China are rising and concerns, and continuing worries over the second wave of COVID-19 drove the steepest stocks selloff in a month and a bond rally

The , which tracks the greenback against a basket of other currencies, edged down 0.11% to 92.942 by 10:31 AM ET (2:31 AM GMT).

On the COVID-19 front, the U.S., Russia and France all set new records for the number of daily COVID-19 cases. There are over 43.4 million cases globally as of Oct. 27, according to Johns Hopkins University data.

Some investors were wary of the dollar’s prospects ahead of the Nov. 3 U.S. presidential election.

“The dollar is broadly stronger, but not massively,” with structural forces such as low real yields holding back further gains adding to the wait-and-see approach to the election, National Australia Bank (OTC:) senior FX strategist Rodrigo Catril told Reuters.

“I think many would probably remember the bad experiences we had going into the Trump-Clinton election [in 2016] … if you had a position on [the election], you would have been whipsawed big time. I think the strategy this time is to travel light, and to choose the opportunity on the day rather than take on a very, very strong position going into the election,” Catril added.

With a week remaining, although polls are giving Democrat candidate Joe Biden a solid lead over President Donald Trump, both men were engaging in some last-minute campaigning in battleground states where the race is tighter.

Some investors view a Biden victory, especially if combined with a Democrat Senate, as negative for the greenback as the Democrats are expected to introduce stimulus measures with big price tags to combat COVID-19, which is expected to improve investor sentiment and boost riskier currencies.

Investors are already starting to bet on a Biden victory, with positioning data showing long bets on the safe-haven yen shrinking for a fourth consecutive week. But a fall in short bets against the yen pointed to increased uncertainty about the election’s outcome.

The pair inched down 0.10% to 104.71.

The pair edged down 0.12% to 6.7038. U.S.-China tensions mounted over a potential $2.4 billion sale of U.S. anti-ship missiles to Taiwan, potentially encompassing as many as 100 Harpoon Coastal Defense Systems built by Boeing (NYSE:). The systems in turn include up to 400 land-based missiles China reacted to the news by slapping sanctions on U.S. companies, including Lockheed Martin (NYSE:), Boeing Defense and Raytheon (NYSE:) “in order to uphold national interests,” Chinese Foreign Ministry spokesman Zhao Lijian said on Monday. Meanwhile, the Chinese Communist Party will set the nation’s next five-year plan within the week.

The pair edged up 0.17% to 0.7134 and the pair edged up 0.1% to 0.6690. The pair inched up 0.10% to 1.3037.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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GBP, AUD, USD Volatility to Swell on Cross-Continental Geopolitical Risks?

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2020 Election, Brexit, China Plenum, Japan Prime Minister Speech, WTO Tariff Rewards, GBP, AUD, EUR – Talking Points

  • British Pound braces for Brexit as political volatility rattles GBP crosses
  • Australian Dollar traders closely eyeing Chinese Plenum and 5-year plan
  • Euro, US Dollar price action may pick up on upcoming WTO tariff ruling

Brexit and the Pound

Implied volatility in the British Pound may rise throughout the week as EU and UK policymakers buckle down to finally hammer out a Brexit deal before mid-November. While the initial timeline was set for a month earlier, friction over fisheries has remained a key sticking point. Amid the delays, UK Prime Minister Boris Johnson has warned that businesses should start to prepare for a no-deal outcome.

The issue over fisheries from the UK perspective stands on the same ideological pillars that underwrote the Brexit movement: notions of reclaiming of sovereignty – hence the phrase “take back control”. In this light, it is perhaps not surprising that this issue is so sensitive, and this is amplified by the economically-strategic value it adds to whomever holds the rights over it.

On Friday, France reportedly said it was preparing to compromise on this issue which it had previously taken a hard stance against. This comes as UK Trade Secretary Liz Truss said that both the EU and UK are “making good progress on the negotiations”. Positive developments like these could push the British Pound higher, though given the volatility of the situation, a hiccup in talks could easily reverse those gains.

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EUR/GBP Analysis

EUR/GBP price action towards the end of last week is indicative of how domestic political volatility in the UK can derail what appeared to be a clear technical pattern. The pair was being guided lower by steep, descending resistance before breaking out on October 20, aggressively retreating the following day, and two days later blasting through it again.

EUR/GBP – Daily Chart

Chart showing EUR/GBP

EUR/GBP chart created using TradingView

Looking ahead, if the downtrend is indeed invalidated, the next area EUR/GBP will likely have to clear is a shelf at 0.9190. Clearing that layer could open the door to the March swing-high at 0.9258. Having said that, capitulation at 0.9190 could indicate a lack of underlying confidence in the pair’s short-term outlook. It is likely that its retreat would coincide with a lack of progress in Brexit negotiations.

Japan’s New Prime Minister Gives First Policy Speech

This week, the new Japanese Prime Minister Yoshihide Suga who replaced Shinzo Abe, will be making his first policy speech in the role. This event under normal circumstances would be something noteworthy to watch, but the importance of it is now amplified by virtue of the coronavirus pandemic. One main topic will be climate change with a focus on cutting Japan’s greenhouse gas emissions to net zero by 2050.

In terms of stimulus, Nikkei news reported that the new PM may attempt to introduce and implement stimulus as early as November. The country has already introduced a $2.2 trillion fiscal stimulus bill, many provisions reflecting similar measures taken by other states like loans to small businesses and cash payments. A robust and generous plan could push local equities higher but pressure the anti-risk Japanese Yen.

Follow me on Twitter @ZabelinDimitri for more updates on how politics impacts financial markets.

China Plenum Begins – Why Does it Matter?

China’s Communist Party will be meeting from October 26-29 in Beijing to discuss and plan for the installment of the 14th 5-year plan for the period of 2021-2025. With mounting tension between China and the West – particularly the US – the Asian giant may start to focus on its so-called dual circulation policy. This entails strengthening its domestic economic vitality and shifting away from foreign independence.

Beijing has been facing growing pressure as a result of its policies in the South China Sea, Hong Kong and controversy in the Xinjiang region that has drawn international scrutiny and condemnation. This shift inward is also amplified by comments like President Donald Trump who talked about decoupling from China as tensions between the two grow amid trade war uncertainty and the novel Covid-19 pandemic.

This policy shift accelerated following the Trump administration’s efforts to curtail China’s importation and use of US-based chipmaking technologies. As I wrote in another piece: “Washington has even gone so far as to ban all chip suppliers from selling their goods to Asian tech giants like Huawei if the hardware being sold uses American equipmentThis has pushed Beijing to start rapidly developing its own chipmaking industry.

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Looking ahead, greater separation of China from the world would likely mean a proverbial musical chairs of supply chains as each one attempts to optimally position themselves in a constantly-shifting global order. The main takeaway is the uncertainty of the situation and the impact it may have on China and neighbors that rely on its economic performance – like Australia.

WTO to Grant EU Tariff Rewards

The World Trade Organization (WTO) is expected to formally award the European Union the right to impose $4 billion in retaliatory tariffs against the US’s subsidies to aeronautical giant Boeing. The EU intends to notify the Dispute Settlement Body (DSB) of its intent to exercise its right to these tariffs at the next meeting on October 26. This is comes in response to the US using tariffs against the EU for their subsidies to Airbus.

The White House has warned that it will hit back if the bloc imposes these tariffs, particularly since it comes during a politically-delicate time in an election where Mr. Trump is lagging in the polls. Escalation in this area could compound risk aversion caused by delayed fiscal stimulus talks, potentially setting EUR/USD up for a pullback.

EUR/USD Outlook

EUR/USD may retest the multi-year swing-high range between 1.1936 and 1.1965 in the coming week. If resistance is cleared, it could market the start of a trend-defining change. If the underlying narrative shifts adequately enough, bullish sentiment may swell and amplify the pair’s gains following its ascent in June and subsequent period of congestion and decline.

EUR/USD – Daily Chart

GBP, AUD, USD Volatility to Swell on Cross-Continental Geopolitical Risks?

EUR/USD chart created using TradingView

— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or@ZabelinDimitrion Twitter





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