By Vatsal Srivastava
SINGAPORE (Reuters) – The dollar trod water in nervous trade on Friday ahead of a meeting of U.S. and Chinese leaders that might, or might not, lead to a truce in the Sino-U.S. trade war, which would boost emerging market currencies at the expense of safe havens.
The greenback has been under pressure this week on growing expectations that the Federal Reserve would slow down its pace of monetary tightening, a view reinforced by comments on Wednesday from Chairman Jerome Powell.
Despite the dovish comments from Fed officials, there was no large scale dollar sell-off, partly due to the strength of the U.S. economy, weakening growth elsewhere, and dollar’s own status as a safe haven amid the Sino-U.S. trade war.
It held steady Asian trade, with an index (DXY) measuring its value versus six peers up marginally at 96.72.
The focus is now on a planned meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping at the G20 summit in Buenos Aires between Nov. 30-Dec. 1.
Trump kept markets nervous by sending mixed signals on Thursday about the prospects for a trade deal with Xi.
“If we see a truce, the Aussie and kiwi dollar will perform exceptionally well. We see a lot of upside in crosses such as Aussie/yen which would benefit from a risk on move,” said Nick Twidale, chief operation officer, Rakuten Securities.
“If tariffs on Chinese imports stay at 10 percent, the dollar is likely to weaken in a risk-on move,” he said.