Kiwi leads faint risk rally, Brexit promise lifts sterling


By Tom Westbrook

SINGAPORE (Reuters) – The dollar and export-focused currencies found support on Monday as positive signs for the U.S. economy and upbeat headlines on U.S.-China trade talks boosted investor confidence.

The pound climbed, too, on hopes for an imminent Brexit and an end to years of political paralysis.

The day’s mood – tempered with weariness at the flow of trade news – was best illustrated by the New Zealand dollar. It rose 0.4% against the safe-haven Japanese yen (NZDJPY=) to 69.83 yen.

“Even if the numbers are small, there’s a message in there that risk appetite has improved,” said Westpac FX strategist Sean Callow.

The dollar added 0.1% on the yen to 108.76 yen and touched its highest level since Nov. 14 against the euro (EUR=) at $1.1012. It sat at 98.278 against a basket of currencies, just below a two-week high (DXY).

Sterling rose 0.1% to $1.2847, after British Prime Minister Boris Johnson, whose Conservative Party leads in opinion polls ahead of the Dec. 12 election, promised to bring a deal to leave the European Union to parliament before Christmas.

“The markets are holding on to any sort of positivity we get at the moment,” said Sean MacLean, research strategist at Pepperstone, a brokerage in Melbourne. “We want to keep that momentum going.”

Keeping hopes for a breakthrough in trade talks alive was the weekend announcement of Chinese plans for improving protection of intellectual property rights – seen as a move to address a sticking point between the parties.

U.S. national security adviser Robert O’Brien also said on Saturday a deal was possible by year’s end.

On the economic front, the greenback was buttressed by better-than-expected U.S. manufacturing data on Friday, seen as staving off the need for a rate cut. The main check on confidence has been rising tensions over Hong Kong.

The city has been rocked by more than five months of anti-government protests, and Beijing has already reacted angrily to the passage of U.S. legislation backing protesters, which has cleared Congress but not been endorsed by President Donald Trump.

“The price of the ‘Hong Kong bill’ will be increased underlying U.S.-China tensions,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore, adding that means greater uncertainty around the trade deal.

Nevertheless, the day’s optimistic sentiment was enough to lift the trade-exposed Australian dollar 0.2% higher on the greenback to $0.6796, and for the New Zealand dollar to gain 0.3% to $0.6421.

China’s yuan strengthened slightly to 7.0356.

Later in the trading day focus is expected to shift to German service-sector data and a speech from the European Central Bank’s Chief Economist Philip Lane at 1800 GMT.

U.S. Federal Reserve Chairman Jerome Powell’s makes a speech at 0000 GMT.

Kiwi leads faint risk rally, Brexit promise lifts sterling

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