Investing.com – The dollar edged lower against other major currencies on Wednesday, with investors taking a breather as U.S. and Chinese negotiators continued their efforts to seal a preliminary trade deal.
As Washington and Beijing work to narrow their differences enough to sign a “phase one” trade deal as early as this month, hopes of a breakthrough have boosted market sentiment.
After sizeable moves on Tuesday, which included a strengthening in China’s offshore yuan to three-month highs against the dollar, currency markets moved into wait-and-see mode.
“The market now wants confirmation that there is a venue, that this (phase one deal) will be signed,” said Jane Foley, senior currency strategist at Rabobank in London.
“A lot of good news was built into the price and unless we get something more, a little bit of disappointment will come through.”
The U.S. dollar index, which measures the dollar’s value against other major currencies was 0.2% lower at 97.64 by 04:15 AM ET (09:15 GMT) after rising 0.4% the previous day.
The euro was at 1.1088, having dropped 0.5% on Tuesday, and was not far from a near three-week low of 1.10635 hit that session.
Against the yen, the dollar was a touch lower at 108.99, but was still not far from its October high of 109.28.
Analysts said that better-than-expected U.S. economic data in the past week had also eased expectations for further easing from the U.S. Federal Reserve – a positive development for the greenback.
U.S. service sector data published on Tuesday showed that business sentiment rebounded in October from a three-year low in September.
The ISM non-manufacturing sector index rose to 54.7 from 52.6 in September.
The rebound is a welcome sign for dollar bulls as a fall in the index would have suggested that malaise in trade war-hit manufacturers was infecting the service sector, too.
The data came after strong a U.S. employment report on Friday.
–Reuters contributed to this report