The US dollar fell against a basket of currencies on Friday after China and the US agreed on an initial trade deal that rolls back some US tariffs in exchange for China’s increased purchase of farm goods, cooling a contentious trade dispute.
The US dollar fell as the trade deal and the British election results sapped safe-haven demand for the greenback.
British Prime Minister Boris Johnson won a resounding election victory that would allow him to end three years of political paralysis and take the UK out of the EU by Jan. 31.
The US dollar index on Friday fell 0.23 percent 97.18, down 0.5 percent for the week.
The pound rose to a 19-month high against the US dollar at US$1.3335, up 1.31 percent for the day and 1.4 percent for the week.
The euro on Friday fell 0.09 percent to US$1.1118, down 0.9 percent for the week.
In Taipei, the New Taiwan dollar on Friday rose against the greenback, gaining NT$0.089 to close at NT$30.317, up 0.6 percent from last week’s NT$30.500.
Against the Japanese yen, which tends to draw investors during times of geopolitical or financial stress as Japan is the world’s biggest creditor nation, the US dollar was about flat on Friday at ¥109.36 per dollar, but was up 0.7 percent for the week.
The yuan rallied the most in a year. The onshore rate advanced as much as 1 percent to 6.9570 per US dollar on Friday, the most since December last year and the strongest since Aug. 2 on an intraday basis, before paring.
Beijing agreed to buy US$32 billion in additional agricultural goods over the next two years, US officials said, up from a baseline of US$24 billion purchased in 2017, before the trade dispute started.
US President Donald Trump said he thought China would hit US$50 billion in agricultural purchases.
However, investors were slow to embrace the news fully, as both sides have engaged in brinkmanship.
Investors are weary of the rhetoric, while on the margin Johnson’s victory is bigger news than what could be viewed as trade positioning, Cresset Capital Management LLC chief investment officer Jack Ablin said.
“Investors at this point are tired of the talk and are looking for a handshake,” he said.
The back and forth in trade talks between China and the US is emblematic of a great power struggle, Jupiter Absolute Return Fund manager James Clunie said.
“If there are two great countries locked in a strategic war, which is what a great power struggle is, then that is not going away, that is probably with us for a long time,” he said.
Additional reporting by Bloomberg and CNA, with staff writer
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