Dollar struggles near 2-month lows, yen sags on receding risk aversion

The dollar struggled near two-month lows, while the yen also sagged on Friday on reduced safe haven demand amid a switch in investors’ view that the China-US trade conflict would be less damaging to global growth than initially feared.

The Equicom

The dollar index against a basket of six major currencies stood at 93.910 after touching 93.829 overnight, its lowest since July 9. The index has fallen more than 1 per cent this week, with investor flows being diverted away from the greenback to its peers such as emerging market currencies amid an ebb in US-China trade war concerns. The better risk sentiment contrasted with a Reuters poll showing forecasters were unanimous in their view that the trade row between the world’s two top economies is bad for growth.

The euro was also a beneficiary of the shift in currency flows. The single currency was steady at $1.1777 after climbing 0.9 per cent the previous day, when it had scaled a three-month peak of $1.1785. “The ‘risk on’ mood in light of optimism towards US-China trade issues has cleared the path for the euro’s rise,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

Helped by a bounce in currencies such as the Turkish lira and South African rand, ravaged earlier in the month by trade friction and domestic factors, MSCI’s emerging market currency index rose to a three-week peak on Thursday. The Australian dollar, seen as a gauge of risk sentiment, stood near a three-week high of $0.7293 touched overnight. The Aussie has jumped nearly 1.9 per cent this week.

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