By Stanley White
TOKYO (Reuters) – The dollar nursed losses against major currencies on Tuesday as receding hopes for a preliminary trade deal between the United States and China hurt demand for the greenback.
The Australian dollar held steady before minutes from a Reserve Bank of Australia policy meeting which may provide clues about the future course of interest rates.
There have been high expectations that the United States and China would sign a so-called “phase one” deal some time this month to scale back their 16-month long trade war.
However, the dollar took a hit on Monday after CNBC reported that China is pessimistic about agreeing a deal, which suggests a resolution to perhaps the biggest risk to the global economy remains elusive.
“The dollar tried to break above 109 yen, but it couldn’t because of worries about the trade deal,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
“The Treasury market is starting to reflect similar concerns about the lack of a trade deal. This will keep dollar/yen in a narrow range.”
The dollar was quoted at $1.1072 per euro
Against a basket of six major currencies, the dollar index <.DXY> stood at 97.794, close to a two-week low.
Citing a government source, CNBC reported on Monday that Beijing was pessimistic about a trade deal with the United States, troubled by Trump’s comments that there was no agreement on phasing out tariffs.
Washington and Beijing have imposed tariffs on each other’s goods in a bitter dispute over Chinese trade practices that the U.S. government says are unfair.
The tariffs have slowed global trade and raised the risk of recession for some economies. Many economists say the drag on global growth will remain as long as tariffs stay in place.
Currency traders were also wary of the dollar after Trump met U.S. Federal Reserve Chairman Jerome Powell on Monday amid the U.S. president’s repeated criticism that the Fed has not lowered interest rates enough.
“Everything was discussed including interest rates, negative interest, low inflation, easing, Dollar strength & its effect on manufacturing, trade with China, E.U. & others, etc.,” Trump tweeted soon after the meeting, calling the session “good & cordial.”
In a statement, the Fed said Powell’s expectations for future policy were not discussed, but Trump has for more than a year charged the Fed with undermining his economic policies by, in his view, keeping interest rates too high.
Elsewhere in the currency market, the Australian dollar
Australia’s central bank will release minutes later on Tuesday from its meeting earlier this month where it kept policy steady but left the door ajar for further easing if needed.
The central bank has already cut rates three times to an historic low of 0.75%.
The Aussie took a hit last week after data showed Australian employment suffered its sharpest fall in three years in October, underlining the need for stimulus.
(Reporting by Stanley White; editing by Richard Pullin)