July 1, 2019 / 7:12 PM / 2 months ago

FOREX-Dollar climbs to two-week high as U.S.-China trade tensions ease

    * Trump, Xi agree over the weekend to restart trade talks
    * Risk assets rally, safe-haven yen, Swiss franc fall
    * Offshore yuan nears two-month high, data tempers gains
    * U.S. manufacturing index comes in slightly higher than expected
    * GRAPHIC-World FX rates in 2019: tmsnrt.rs/2egbfVh

 (Adds comments, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 1 (Reuters) - The dollar rose to two-week highs on Monday after the
United States and China agreed to resume trade talks, with investors selling safe-haven
currencies such as the Japanese yen and Swiss franc as tensions eased between the world's
two largest economies.
    While reports of an agreement had been flagged ahead of U.S. President Donald Trump
and Chinese counterparty Xi Jinping's meeting on the sidelines of the G20 meeting in
Osaka, Japan, the outcome was more positive than investors had expected.
    Trump said he would hold back on new tariffs and China will buy more farm products,
and he offered to ease restrictions on tech company Huawei.
    Market participants, however, remained cautious as the negotiations did not signify
that a deal is imminent.
    "Uncertainty will linger," said Kevin Cummins, senior U.S. economist at NatWest
Markets. "As we have learned - from the swift breakdown in talks with China in May after
a deal seemed imminent, as well as the threat of tariffs against Mexico in June even
after a trade deal with Mexico and Canada had been reached - a delay in action now does
not necessarily beget a full trade deal in the near future."
    Still, China's offshore yuan also rose more than 0.5% to as high as 6.8165 yuan per
dollar, near a two-month high, before easing back to 6.8476 after disappointing factory
activity data.
    The dollar also extended gains after data showed the U.S. manufacturing activity
index, as measured  by the Institute for Supply Management, came in slightly higher than
expected in June, at 51.7.
    The details of the report, however, were not so stellar, with the prices paid index,
an inflation indicator, hitting its lowest since February 2016, and the forward-looking
new orders index falling to its weakest since December 2015.
    "Although the headline ISM manufacturing index didn't fall as far as feared in June,
the decline in the ... new orders component suggests the worst is still to come," said
Michael Pearce, senior U.S. economist at Capital Economics.
    The dollar, which has fallen in recent weeks on rising expectations for Federal
Reserve interest rate cuts, rose 0.8% against a basket of currencies, to 96.848, with the
index hitting 96.867, a roughly two-week peak. 
    The euro, meanwhile, fell 0.8% to $1.1283.
    The yen, which investors tend to buy when they are looking for safety, fell, pushing
the dollar up 0.5% at 108.47 yen. Earlier, the dollar hit a two-week high of
108.53 yen.
    The dollar also rose against the Swiss franc, up 1.2 pct to 0.9839 franc,
after hitting a two-week peak of 0.9884.
    Currency bid prices at 1459 EDT (1859 GMT):
 Description      RIC       Last      U.S. Close  Pct      YTD Pct  High Bid   Low Bid
                                      Previous    Change   Change              
 Euro/Dollar      EUR=      $1.1285   $1.1368     -0.73%   -1.60%   +1.1374    +1.1282
 Dollar/Yen       JPY=      108.4600  107.8800    +0.54%   -1.63%   +108.5300  +108.1100
 Euro/Yen         EURJPY=   122.39    122.65      -0.21%   -3.03%   +123.3500  +122.3700
 Dollar/Swiss     CHF=      0.9874    0.9760      +1.17%   +0.62%   +0.9884    +0.9783
 Sterling/Dollar  GBP=      1.2634    1.2693      -0.46%   -0.96%   +1.2707    +1.2633
 Dollar/Canadian  CAD=      1.3139    1.3090      +0.37%   -3.65%   +1.3145    +1.3064
 Australian/Doll  AUD=      0.6957    0.7020      -0.90%   -1.31%   +0.7036    +0.6957
 Euro/Swiss       EURCHF=   1.1144    1.1097      +0.42%   -0.99%   +1.1161    +1.1120
 Euro/Sterling    EURGBP=   0.8929    0.8953      -0.27%   -0.61%   +0.8979    +0.8925
 NZ Dollar/Dolar  NZD=      0.6667    0.6717      -0.74%   -0.74%   +0.6731    +0.6665
 Dollar/Norway    NOK=      8.5862    8.5313      +0.64%   -0.60%   +8.5894    +8.5106
 Euro/Norway      EURNOK=   9.6888    9.7025      -0.14%   -2.19%   +9.7018    +9.6647
 Dollar/Sweden    SEK=      9.3575    9.2815      +0.05%   +4.40%   +9.3667    +9.2783
 Euro/Sweden      EURSEK=   10.5609   10.5552     +0.05%   +2.88%   +10.5670   +10.5260
 (Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Jonathan Oatis and James
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