August 28, 2018 / 3:05 PM / in 8 months

FOREX-U.S. dollar hits four-week low as risk appetite returns

    * U.S.-Mexico deal keeps focus on Canada
    * U.S. consumer confidence stronger than expected
    * Graphic: World FX rates in 2018

 (Recasts, adds comments, FX table, updates prices, changes
byline, changes dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 28 (Reuters) - The dollar stuck to a four-week
low on Tuesday, as the U.S.-Mexico trade deal reached Monday
aimed at overhauling the North American Free Trade Agreement
prompted investors to continue unwinding their safe-haven bets
on the greenback and boosted appetite for riskier assets. 
    The U.S. currency has fallen for three straight weeks, down
nearly 2 percent.
    "The weakness in the buck was the result of relief risk-on
flows after the U.S. completed a trade deal with Mexico, 
indicating that the Trump administration will be willing to
negotiate with Canada and Europe as well," said Boris
Schlossberg, managing director of FX strategy at BK Asset
Management in New York.
     The United States and Mexico agreed on Monday to overhaul
NAFTA, putting pressure on Canada to agree to new terms on auto
trade and dispute settlement rules to remain part of a
three-nation pact.
    In mid-morning trading, the dollar was down 0.2 percent
against a basket of rival currencies at 94.637, after
earlier hitting a four-week trough. Against the Canadian dollar,
the greenback fell 0.2 percent to C$1.2928.
    The dollar last Friday and Monday was stung as well by
comments from Federal Reserve Chairman Jerome Powell at the
Jackson Hole, Wyoming conference that seemed to suggest a slower
pace of U.S. interest rate increases. 
    He did say the Fed will continue to raise interest rates 
but he noted that the Fed sees no clear sign of inflation
accelerating above 2 percent.
    "Jay Powell is sounding like a dove, and I believe it is
self-preservation," said John Taylor, president and co-founder
of research firm Taylor Global Vision in New York. "There are
one or two hikes ahead: we bet it is one in December giving an
open track over the election." 
    U.S. President Donald Trump in an interview with Reuters
last week said he  was “not thrilled” with the Federal Reserve
under his own appointee, Powell, for raising interest rates.
    The greenback did pare losses after the U.S. consumer
confidence index came in higher than expected.
    In addition, the Chinese central bank allowed its currency
to strengthen against the dollar via its daily fixings, further
boosting risk appetite. 
    Prior to the market opening, the People's Bank of China
(PBOC) raised its daily yuan midpoint by almost 0.7 percent, the
most in nearly 15 months.
     The euro, meanwhile, rose 0.2 percent to $1.1708,
despite worries Italy's public deficit could exceed the European
Union's ceiling of 3 percent of gross domestic product, senior
officials said.
    Currency bid prices at 10:36AM (1436 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1713        $1.1677     +0.31%         -2.36%      +1.1733     +1.1663
 Dollar/Yen       JPY=        111.1300       111.0800    +0.05%         -1.37%      +111.3500   +110.9600
 Euro/Yen         EURJPY=     130.15         129.70      +0.35%         -3.71%      +130.2700   +129.6600
 Dollar/Swiss     CHF=        0.9756         0.9795      -0.40%         +0.13%      +0.9809     +0.9746
 Sterling/Dollar  GBP=        1.2882         1.2891      -0.07%         -4.66%      +1.2931     +1.2862
 Dollar/Canadian  CAD=        1.2915         1.2963      -0.37%         +2.72%      +1.2981     +1.2887
 Australian/Doll  AUD=        0.7345         0.7350      -0.07%         -5.85%      +0.7362     +0.7322
 Euro/Swiss       EURCHF=     1.1429         1.1439      -0.09%         -2.22%      +1.1453     +1.1419
 Euro/Sterling    EURGBP=     0.9091         0.9060      +0.34%         +2.34%      +0.9091     +0.9053
 NZ               NZD=        0.6709         0.6694      +0.22%         -5.32%      +0.6721     +0.6677
 Dollar/Norway    NOK=        8.3388         8.3210      +0.21%         +1.61%      +8.3509     +8.2906
 Euro/Norway      EURNOK=     9.7666         9.7170      +0.51%         -0.83%      +9.7780     +9.7119
 Dollar/Sweden    SEK=        9.1408         9.0921      +0.83%         +11.45%     +9.1541     +9.0850
 Euro/Sweden      EURSEK=     10.7058        10.6180     +0.83%         +8.81%      +10.7210    +10.6157
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Saikat Chatterjee in London)
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