FOREX-Trade war worries boost dollar as GDP miss knocks euro
* Euro zone GDP weaker than expected in Q3, sentiment sours
* Fears of more U.S. tariffs on Chinese goods help dollar
* Yuan slides to decade low on economic slowdown fears
* Graphic: World FX rates in 2018 (Adds quotes, details, updates prices)
By Tommy Wilkes
LONDON, Oct 30 (Reuters) - The dollar hit a new 2 1/2-monthhigh on Tuesday, supported by worries about an escalation of theSino-U.S. trade war and more signs the United States economy isoutperforming rivals, while weak euro zone growth knocked thesingle currency lower.
Data showed that the euro zone grew less than expected inthe third quarter and economic confidence continued to fall,sending the euro to a day's low. The headwinds for the euro, which include a standoff betweenthe European Union and Rome over Italy's rules-breaking budget,come just as demand for the dollar rebounds.
"Trade wars, a recovery on equity markets and poor data outof Europe and stronger data in the U.S." were supporting thedollar at the euro's expense, said Niels Christensen, chiefanalyst at Nordea.
"I don't think the euro will bounce back. There's no reasonfor the ECB (European Central Bank) to start sounding morehawkish unless inflation surprises," he said.
Investors bought into the dollar after Bloomberg reportedthat Washington was preparing to announce tariffs on allremaining Chinese imports by early December if talks betweenU.S. President Donald Trump and Chinese President Xi Jinpingfail to ease the trade war.
YUAN AT DECADE LOW
With concerns about an escalating trade war and a Chineseeconomic slowdown mounting, the yuan hit a 22-month low inoffshore markets . The onshore currency slid toits weakest in 10 years. The yuan has been one of the biggest casualties as thedollar steamrolled higher in 2018.
The dollar, measured against a basket of its peers, rose 0.3percent to 96.926 , its strongest since Aug. 15.
Friday's stronger-than-expected GDP numbers in the UnitedStates and a tentative recovery on Wall Street this week haveagain underlined that the U.S. economy is outperforming.
The euro dropped 0.2 percent to $1.1345 , afterreaching a 10-week low of $1.1336 on Friday. On Monday, thesingle currency fell on news German Chancellor Angela Merkelwould not be seeking re-election as head of the ChristianDemocrats party."This [The euro's weakness] is due to Italian-budget-relatedpolitical tension and fears over the future of the Germanpolitical landscape, which threaten the single currency withfurther downside," said Ricardo Evangelista, senior analyst atonline broker ActivTrades.
The Japanese yen extended its recent losses against thedollar, partly because Japanese investors have been net buyersof offshore equities this month.
The yen fell 0.4 percent to 112.845 , as tradersprepared for the Bank of Japan monetary policy meeting dueWednesday.
In a sign that overall demand for risk was improving despitethe trade war fears, the Australian dollar gained half apercent to $0.7093 on Tuesday.
The Aussie is often viewed as a barometer of broader risksentiment, as well as a proxy for China-related risks sinceChina is the largest buyer of Australia's key exports.
(Editing by Larry King)
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.  |