US Dollar And Chinese Yuan React Positively To China-U.S. Trade Ceasefire
Things are finally looking good for the U.S. and China economies following a trade truce by the leaders of the two countries. They agreed to hold talks that will end the long-lasting trade standoff.
The two countries have been locked in a tough trade war that has dragged on for multiple months, which was more than expected. However, the resumed trade talks between the two countries demonstrated their commitment to end the trade war. It has spurred renewed hope of a sustainable trade deal.
Traders seem to have responded positively to the news judging by the subsequent rally seen in the US dollar and the Chinese Yuan.
Both the USD and the Chinese Yuan kicked off Monday on a bullish performance after it was announced that China and the U.S. would resume their trade talks. It was previously reported that U.S. president Donald Trump and China’s President Xi Jinping would hold a meeting at around the same that the G20 summit was happening in Japan.
The US dollar surged by 0.5% against the Yen on Monday after China and the U.S. reached the ceasefire agreement. The dollar surged to 108.48 yen, thus securing a strong recovery after previously closing in on its 106.78 six-month low that it achieved on Tuesday last week. The USD also surged by 0.3% against the Swiss Franc on Monday.
President Trump reportedly agreed to withhold the tariffs that he planned to impose on China and even lift the Huawei ban. China will, in turn, continue to purchase farm products from the U.S. The agreement between the two countries eased the trade tensions which had so far a global impact.
The compromise reached between Trump and Xi at the week's G20 meeting went further than most had expected, with Trump putting the next tranche of tariffs on hold and reopening U.S. companies' ability to supply Huawei," noted Adam Cole, a currency analyst at RCB.
Haven currencies take a hit as trade tensions die down
The USD and Yuan’s recovery has subsequently caused a bearish performance in the Japanese Yen and the Swiss Franc, which are among the top haven currencies in the world. Investors usually purchase safe havens because that is the time they seem to gain value or remain strong in times of crisis.
The agreement between China and the U.S. saw the Japanese Yuan lose about 0.6% of its value, which brought it down to 108.53. The last time that its value was around that range was on June 19.
The Swiss Franc also turned bearish by 0.4% against the Euro, thus dropping to the 1.1142 range. It also lost by 0.8% against the USD.
Meanwhile, the Australian dollar dropped to $0.6993, thus registering a 0.4% decline, but this was mainly due to the weight of weak factory data from China.
The positive news about the China-U.S. trade talks represents a great start this week for economies of the two countries. The trade war between the two countries pushed their economies to the edge, but now there is a chance that things will get back on track.