Euro steady as US dollar set for worst week since October

Reuters London Dec 06, 2019, 03.56 PM(IST) Dec 06, 2019, 04.20 PM(IST)

File photo: Dollar, Euro and Pound banknotes are seen in this picture illustration taken Photograph:( Reuters )

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The resurgent kiwi enjoyed a hefty recovery thanks to some renewed risk appetite, as well as due to positive domestic factors

The euro was steady against the dollar on Friday, though the greenback was headed for its worst week since mid-October, dragged down by nervousness around US-China trade relations and hints of weakness in the US economy.

The resurgent kiwi enjoyed a hefty recovery thanks to some renewed risk appetite, as well as due to positive domestic factors.

Against a basket of six currencies, the greenback fell to a one-month low of 97.355. The euro was last flat at $ 1.1106.

Sterling was 0.2 per cent weaker at $1.3132 and 84.58 pence against the euro but parked close to a 2-1/2-year high as traders grow more confident the uncertainty over Brexit could soon be over.

Opinion polls suggest the Conservative Party of Prime Minister Boris Johnson is on course for a majority on December 12 to push through the Brexit deal he struck with the EU after the bloc granted a third delay to a divorce that was originally supposed to have taken place at the end of March.

US President Donald Trump remained upbeat overnight on trade and said talks are "moving right along" and that "we'll have to see" about the increase in tariffs that are scheduled to take place on December 15.

But markets were unconvinced, with worries stemming from a lack of similar enthusiasm from China, keeping the dollar subdued.

Chinese officials reiterated their stance that some US tariffs must be rolled back for a deal to end the 17-month trade war between the two powers, something Washington has given no sign of doing. 

Still, risk sentiment recovered somewhat, pushing the New Zealand dollar to a four-month high of 0.6568 against the US dollar.

"My guess and it’s just a guess is that the rally in NZD may have started with a recovery in risk sentiment" driven by Trump's comments, said Marshall Gittler, strategist at ACLS Global, noting the kiwi tracked the safe-haven Japanese yen's performance on Thursday.

The currency also got a boost from Reserve Bank of New Zealand Deputy Governor Geoff Bascand saying in a Bloomberg interview that the latest economic developments are "supportive of the story that we’re near or around that turning point" in the economic cycle, Gittler said.

US non-farm payrolls data due at 1330 GMT comes after dismal numbers showed weak private payrolls, soft services activity, and a shrinking manufacturing sector.

A Reuters poll shows a forecast of 180,000 jobs being added in November, and a miss might leave the Fed reconsidering its wait-and-see mode when the committee meets on Tuesday and Wednesday.

"Markets are in a highly fragile condition at the moment," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

"So there is a greater potential for an exaggerated move if we see a big divergence from expectations," he said. "The risk is in both directions below 150,000 or above 210,000 we could see a significant market reaction."

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