US Dollar Gave Back Earlier Gains from Trade Optimism

LONDON, U.K. – The US dollar gave up a portion of its earlier gains after the optimism on the trade deal between the US and China increased and powered up the global stock market.

Most of the earlier optimism the market has gained started to fade Tuesday, causing the US dollar to jump down from a two-week high against the Japanese yen during the Asian trading session today.

On the other hand, the Euro held strongly to its value against the US currency despite the unexpected rising of the mood among the consumers in Germany as December looms over. The unanticipated increase in consumer sentiments suggests that heading into the holiday season, the household spending is expected to continue growing, further powering up the biggest economy in Europe at the end of the year.

The increased optimism in the stock market came on Monday after reports were out that the two of the major economies in the world are getting closer on phase one of the long-standing trade deal. Recent news on trade talks further powered up the Market with the Chinese and US government conversing through a phone call on how to proceed with the trade negotiations early on Tuesday.

Currently, the dollar was recorded trading neutral at about 108.98 yen, going down from its highest level since November 12 at 109.205 from the previous trading session. On the other hand, the Euro was modestly unaffected, staying flat against the US dollar, valuing at $1.1017, which is not so far from the 11-day low on Monday with a recorded $1.1004.

In the derivatives market, the prices suggest the market players are mostly not expecting big moves for the common currency. The euro/dollar pair showed falling one-month volatility to about 4.40% or 4.15 points, the lowest it recorded from five years ago. The three-month volatility for the pair also recorded a 4.6% decline, going down 4.4 points. It is another record low for euro/dollar, which indicates that market players do not see the main currency pair from going away from its current levels.

Currencies that are sensitive to the trade deal between the US and China, however, have seen significant optimism in prices on Tuesday trading with the Chinese yuan rising to another one-week record high, valuing about 7.0181 against the US dollar although it was the last trading around the 7.0399 price point.

On the other hand, in a note to their clients, MUFG analysts said that any further increase in the USD/JPY pair would be a bit more challenging to overcome, especially since the global yields is starting to lose its upward momentum.