US/China trade dispute hurts dollar

Story link: US/China trade dispute hurts dollar

The US dollar weakened on Tuesday as tensions grew between the United States and China after US complaints to the World Trade Organization over what the US sees as China’s failure to protect intellectual property rights. The US is also unhappy about restrictions China puts on the sale of foreign books and films there. China made a statement saying that the US complaints will “severely damage” trade relations between the two nations and rejected an invitation to participate in G7 meetings scheduled for this coming weekend in Washington, DC.

The greenback added just a bit in relation to the Japanese yen, to ¥119.07, but that was due largely to a decision by the Bank of Japan to leave interest rates there at 0.5 percent for the time being. Otherwise, the US dollar dropped 0.6 percent against both the euro and sterling, to $1.3439 and $1.9740 respectively.

Very few analysts had expected the Bank of Japan to raise interest rates so soon after last month’s rate hike, and most said that the yen is likely to continue to weaken as investors continue to use it to fund high-risk carry trades. The yen was 0.3 percent weaker in relation to the euro, to ¥159.91 at midday in New York, while it dropped 0.5 percent to sterling, to ¥235.05.

Sterling was mixed. While it strengthened against both the yen and the greenback, it weakened to a three-week low versus the euro, dropping 0.1 percent to £0.6814.

On the second day of trade on the China Foreign Exchange Trade System, put together by the CFETS and Reuters to provide more transparency in trade of the renminbi, the Chinese currency was slightly weaker against the US dollar to Rmb7.7352. The renminbi trades against the greenback, the Hong Kong dollar, the yen, the euro, and sterling on the new system.