- U.S. China due to discuss trade matters on Saturday
- Investors expect higher volatility after trade talks
(New throughout, updates trading, adds comments to U.S. market open, previous LONDON)
The dollar edged higher on Friday as investors prepared for the fallout from trade talks between the United States and China at the G20 meeting on Saturday, which investors expect will increase volatility across markets.
U.S. President Donald Trump sent mixed signals on Thursday about the prospects for a trade deal with China, saying an agreement was close but he was not sure he wanted one, just as he left for Argentina for a meeting with President Xi Jinping.
Trade Representative Robert Lighthizer said on Friday he would be surprised if Saturday's dinner between Trump and Jinping "wasn't a success."
“For now, really, the trade issue seems to be a dominant theme swaying sentiment,” said Mazen Issa, senior FX strategist at TD Securities in New York. “If you have any sort of news or headlines that is indicative of a positive or negative outcome, I think markets are going to react accordingly.”
The dollar index .DXY gained 0.26 percent to 97.027. The Chinese yuan weakened 0.08 percent to 6.95 per dollar.
Credit Suisse strategists expect the Chinese currency to weaken to a decade low of 7.20 per dollar by end-2019.
Data on Friday showed growth in China's vast manufacturing sector stalled for the first time in over two years in November as new orders slowed, piling pressure on Beijing ahead of the trade talk.
Investors are also continuing to evaluate comments by Federal Reserve Chairman Jerome Powell on Wednesday that the U.S. central bank's policy rate is now "just below" neutral, a level that neither brakes nor boosts a healthy U.S. economy.
The immediate reaction sent the dollar tumbling as investors saw the Fed as likely to end its hiking cycle sooner than previously expected.
Interest rate futures traders are now pricing for only one rate hike in 2019, according to the CME Group’s FedWatch Tool, below Fed projections of three increases during the year.
Some analysts see the move as exaggerated, however, with the Fed more likely to let economic data guide it on when to pause tightening.
"There's no denying that the Fed rhetoric has changed in recent weeks, but we don't think it's changed quite as much as the repricing in rates suggests it has," said Adam Cole, chief currency strategist at RBC Capital Markets in London.
======================================================== Currency bid prices at 9:30AM (1430 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1353 $1.1391 -0.33% -5.36% +1.1400 +1.1354 Dollar/Yen JPY= 113.5000 113.4700 +0.03% +0.74% +113.5700 +113.3400 Euro/Yen EURJPY= 128.88 129.28 -0.31% -4.66% +129.3000 +128.8800 Dollar/Swiss CHF= 0.9983 0.9957 +0.26% +2.46% +0.9987 +0.9952 Sterling/Dollar GBP= 1.2751 1.2792 -0.32% -5.63% +1.2809 +1.2746 Dollar/Canadian CAD= 1.3312 1.3281 +0.23% +5.84% +1.3324 +1.3272 Australian/Doll AUD= 0.7307 0.7318 -0.15% -6.33% +0.7326 +0.7295 arEuro/Swiss EURCHF= 1.1335 1.1344 -0.08% -3.03% +1.1358 +1.1322 Euro/Sterling EURGBP= 0.8901 0.8908 -0.08% +0.20% +0.8925 +0.8890 NZ NZD= 0.6867 0.6857 +0.15% -3.09% +0.6878 +0.6856 Dollar/DollarDollar/Norway NOK= 8.5745 8.5347 +0.47% +4.48% +8.5771 +8.5279 Euro/Norway EURNOK= 9.7380 9.7243 +0.14% -1.12% +9.7468 +9.7170 Dollar/Sweden SEK= 9.0898 9.0648 -0.07% +10.83% +9.1000 +9.0635 Euro/Sweden EURSEK= 10.3219 10.3290 -0.07% +4.92% +10.3483 +10.3160
