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U.S. Dollar Gets Positive Impact from U.S.-China Trade Talks

U.S. Treasury Secretary Steven Mnuchin said that U.S.-China trade talks would resume within two weeks from now. The news immediately erased uncertainty among market participants after the Deputy Minister's level meeting of the two sides in Washington last weekend.

"Actually, I think (the follow-up trade talks) will not be held next week, but next week we will meet with Chinese representatives to hold talks again," Mnuchin said in an interview with Fox Business Network. Mnuchin again added that in the previous meeting, representatives of the two countries had held very constructive talks as an effort to reduce trade tension.

Previously, the U.S. Dollar was depressed because of the negative market response following the results of last week's Deputy Minister of Trade talks. This is apparently related to the "incident" when the Chinese delegation canceled a visit to the U.S. agricultural region and accelerated their return schedule.

Market participants see the cancellation as a reflection that the fundamental differences between the U.S.-China were not resolved at the meeting of the two countries last week. This condition also suppressed the movement of the US Dollar against safe-haven currencies such as the Yen and Swiss Franc.

 

Positive Signs from China Appear, USD / JPY Bounces

At the beginning of this week, market sentiment returned positive following the latest news that said China would soon buy 600,000 tons of U.S. agricultural products. This marked China's good faith to meet U.S. demands, and at the same time dispelled unpleasant rumors regarding the cancellation of a visit by the Chinese delegation to the U.S. agricultural centers last week.

At the time of writing, the DXY Index, which measures the strength of the U.S. Dollar against six major currencies, is around 98.65. Broadly speaking, the Index still maintains its gains in the consolidation zone that has been formed in the last two weeks.

China excludes the burden of import tariffs on some U.S. goods which were then positively welcomed by Trump. The tension of U.S.-China trade relations which has eased in the past few days has increasingly melted China eased import tariffs on some U.S. products such as cancer drugs to foodstuffs such as agricultural products and livestock. 

This step was later responded positively by the U.S. which delayed the increase in import tariffs for Chinese goods. The 'intimate' attitude between the two biggest economies in the world directly ignites risk interest among market participants. 

Trump Welcomes China's Peace Initiative

No doubt, the U.S. Dollar continues to strengthen its position against the Yen, as reflected in the movement of the USD / JPY pair in the following chart. China's decision which first eased the burden of import tariffs on some U.S. products was immediately welcomed by President Trump, who considered this a positive sign ahead of the start of trade negotiations in early October.

"They (China) have made some positive progress... That's pretty good. I think that's a good gesture and a big step," Trump said speaking before reporters. Shortly thereafter, Trump posted a tweet on his Twitter account to announce that the U.S. government had agreed to delay the import tariff increase from 25 percent to 30 percent on Chinese goods worth $ 250 billion. 

The delay makes the tariff increase that would have been effective on October 1 be set to start October 15. Although the nuances of U.S.-China trade relations are currently shrouded in a positive atmosphere, economists are still cautious in considering further U.S.-China reconciliation projections.

"China's decision to ease U.S. goods tariffs can be seen as a sign of sincerity (China) towards the U.S. ahead of negotiations in October. But I am inclined to see China's efforts more towards supporting (the interests of) their own economies," wrote ING economist Iris Pang in a note.

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