Deal back on? Dollar surges as renewed hope emerges

The proposed trade deal between China and the US continued to dominate the foreign exchange trading markets on Thursday and into Friday.

This time it was the greenback which was the main beneficiary – thanks to comments made by an official from the Chinese ministry of commerce which appeared to suggest that the deal was back on the cards.

According to Reuters, the ministry claimed that the so-called “phase one” trade deal may be able to proceed once tariffs on both sides were removed proportionally and in a like-for-like way.

The ministry spokesperson did not appear to insist that there had to be a particular number of tariffs cancelled, provided it was done equally.

According to analysts, there is now a growing perception that the general tide of tariffs will be turning away from the implementation of more tariffs towards removing tariffs which are already there.

The result for the dollar was spectacular, and it headed up to close to its best position in three months in its pair against the safe haven Japanese yen – suggesting that risk-off sentiment was being dropped.

This helped it to recoup losses of 0.3% made the day before.

Further bolstering for the currency came after a statement from a spokesperson for the government of Donald Trump, who said that the US is “very, very optimistic” about the trade deal.

However, there is still no guarantee that the trade deal will go ahead as planned.

The process has been beset by a number of twists and turns, and it is understood by many to still have the potential to go wrong.

The news did not end up spelling entirely positive news for the dollar.

The dollar index, which tracks the currency in direct comparison to several others from across the globe, there was, in fact, an overall drop of around -0.1%.

This was fuelled in part by a rise from the single European currency, which forms a significant part of the dollar index’s weighting.

The euro was seen up by 0.1% – a positive development for the currency, which has been in the doldrums for almost a month.

Generally, however, the currency is still in a low range.

Elsewhere, the Antipodean currencies rode high off the back of the positive sentiment around risk.

This category of currency, which includes the Australian dollar and the New Zealand dollar, often does well when there is a greater appetite for risk.

The Australian dollar was seen to rise by a fifth of a percentage point in its pair with the US dollar.

The offshore Chinese yuan, which is traded on the free currency markets, was seen at 6.9834 in its pair against the US dollar.

It was at its highest point in three months on Thursday.

It also looked set to hold this trend and to build on five weeks of constant gains – meaning that it too is likely to benefit from the renewed positivity around the higher chances of the trade deal being secured.