The U.S. dollar fell broadly on Monday, as currencies battered by trade tensions between the United States and China staged a comeback after leaders from the two countries declared a truce on tariffs.
China’s yuan and several trade-dependent currencies made strong advances against the greenback as investors sold the safe-haven U.S. currency and bought up riskier assets.
U.S. Treasury Secretary Steve Mnuchin said on Monday there was a clear shift in tone at Buenos Aires from past discussions with Chinese officials, as Xi offered a clear commitment to open China’s markets to U.S. companies.
The offshore yuan CNH= gained about 1 percent to 6.879, while the Aussie – viewed as a barometer of Chinese growth – was 0.5 percent higher against the greenback.
“The G20, the dinner in particular, has ignited quite a robust risk rally and that’s coming at the dollar’s expense,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
“That’s mainly because the dollar has been the chief beneficiary of all the trade war rhetoric over the past several months,” Manimbo said.
Emerging market currencies, which have suffered in recent months amid increased trade-related tensions, advanced and MSCI’s index for emerging currencies .MIEM00000CUS was up 0.6 percent.
Bechtel, however, warned that investors should treat the latest trade developments with caution.
“You always have to take it with a grain of salt because at any moment a tweet or headline of some sort could knock things off kilter,” he said.
With trade tensions taking a back seat for the moment, investors’ attention is likely to turn to U.S. monetary policy, analysts said.
The Federal Reserve is expected to raise interest rates again later in December but recent comments from central bank officials about how many more hikes are needed in the current cycle have hurt the dollar in recent sessions.
Sterling fell on Monday to its lowest level since the end of October as growing concerns about British parliamentary approval for a proposed Brexit deal prompted investors to sell the currency.