August 1, 2018 / 2:28 PM / 4 months ago

FOREX-Dollar edges up in quiet session as traders eye Fed

* U.S. threatens 25 pct tariff on $200 bln of Chinese goods-source

* Euro weakens under dollar pressure (New throughout, updates rates, comments to U.S. market open; changes dateline; previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, Aug 1 (Reuters) - The U.S. dollar edged higher against a basket of peers on Wednesday, as major currencies traded in narrow ranges ahead of the conclusion of the Federal Open Market Committee meeting later in the day.

Fears of an escalation in the trade dispute between the United States and China, and higher U.S. Treasury yields supported the greenback.

The dollar index, which measures the greenback against a basket of six currencies, was up 0.13 percent at 94.615.

“It’s pretty quiet this morning, and I think a lot of that is because we have the FOMC meeting,” said Minh Trang, senior foreign currency trader at Silicon Valley Bank in Santa Clara, California.

“The expectation is that there won’t be any rate changes today,” he said. “A lot of people are just waiting to hear the statement and get a little bit more of a clue in terms of the remaining half of the year.”

On Wednesday, payrolls processor ADP said domestic private employers added 219,000 workers in July, more than 185,000 forecast among analysts polled by Reuters.

“With activity booming on the back of the fiscal stimulus, the continued strength of the labor market will keep the pressure on the Fed to continue raising interest rates,” Andrew Hunter, U.S. economist at Capital Economics in London, said in a note.

Fears about what an escalation in the months-long dispute would mean for the Chinese and then the global economy led investors to buy the dollar and sell currencies linked to China’s economic fortunes.

The U.S. administration plans to propose a 25 percent tariff on $200 billion in Chinese imports, up from an original 10 percent, to pressure Beijing into making trade concessions, a source familiar with the matter said. China has vowed to retaliate .

The offshore Chinese yuan slid more than half a percent on reports of the new tariffs. A survey showing Chinese manufacturing grew at the slowest pace in eight months in July also hurt the currency.

The Aussie dollar, seen as a proxy for Chinese growth because of Australia’s export-reliant economy, slipped against its U.S. counterpart.

While an extended trade war could be a negative in the longer-term, in the very near term, simmering trade-related tensions are supportive of the greenback, Trang said.

The dollar was 0.04 percent higher against the yen.

The euro was 0.13 percent lower at $1.1676, under pressure from the stronger dollar and a Purchasing Managers’ Index survey that showed factory output was growing but had nudged up only slightly from June’s 18-month low.

Sterling held near a one-week low before a Bank of England policy meeting that is widely expected to raise interest rates for the second time since the global financial crisis.

Reporting by Saqib Iqbal Ahmed Editing by Marguerita Choy

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