US Dollar Affected By Low Volumes As Trade Negotiations Between China And U.S. Fuel Risk Appetite
The US dollar is feeling the impact of the trade talk hype between China and the U.S, which has encouraged investors to take more risks due to the rising prospects of normalcy.
The trade dispute between the two countries caused a widespread impact on global trade and currencies like the US dollar and the Chinese Yuan. This encouraged traders to dial down on their investments and avoid risking their money.
The two sides recently announced that they are interested in holding talks that will hopefully lead to a viable trade deal.
Investors seem optimistic about the prospects of the renewed talks between China and the U.S.
The Australian Dollar is one of the currencies that benefited from the increased risk appetite by traders with the optimistic expectations about the desire by China and the U.S. to end their trade dispute. This reflected on the AUD/USD currency exchange rate especially which started the week on a bullish trend but then turned bearish on Tuesday, which indicates the AUD gaining strength against the US dollar.
The AUD/USD currency pair kicked off the week from as low as 0.6837 early on Monday morning before peaking at 0.6876. It then reversed and maintained an overall bearish momentum that saw the price hit a low of 0.6849 on Tuesday morning. The currency pair traded at 0.6854 at the time of this press.
The Japanese Yen has also been losing previous gains courtesy of higher risk appetite
The Japanese Yen has been quite popular for the past few months as one of the ideal safe-haven currencies. It has been a favorite for many investors who sought to shield their wealth from the declining value of major currencies as a result of the trade war and the slowed global trade situation.
However, the Yen reached its six-week low on Tuesday as investors embrace riskier currencies once again courtesy of the improving market prospects.
Another major factor that has been encouraging investors to embrace riskier currencies due to the subsiding fears of a no-deal Brexit. This is after British legislators agreed to pass a bill that would push back the Brexit date to next year, therefore giving the lawmakers a chance to agree to a good deal with the European Union.
A recent report regarding German stimulus plans has also contributed to the renewed investments in riskier assets or currencies. It represents positive news after a season in which the European region was weighed down by the economic uncertainties and geopolitical issues such as the Brexit conundrum.
The risk appetite has, however, been fueled by prospects of the China-U.S. trade war coming to an end sometime soon. The two sides have just expressed interest in holding talks, but no headway has been made so far. However, they have been facing pressure to come up with a trade deal because the prolonged trade dispute has been negatively affecting not only the economies of the two countries but also the rest of the world in general.