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Dollar Subdued Despite Easing Sino-U.S. Trade Tensions

The dollar remained subdued despite the easing Sino-U.S. trade tensions – The dollar remained subdued in Asia on Wednesday morning despite the conciliatory comments from the leaders of the U.S. and China that eased the trade tensions between the two countries. The inflation data from Japan and China were also in focus.

The U.S. dollar index that tracks the greenback against a basket of six major currencies last stood at 89.31 at 10:55PM ET (02:55 GMT), down 0.01%. The dollar hit this week’s low at 89.27 overnight.

U.S. President Trump praised his Chinese counterpart Xi Jinping’s kind words on tariffs and automobile barriers, as Xi said he supported free trade and dialogue to resolve disputes in his speech at the Boao Forum. Xi also pledged to open China’s banking and auto manufacturing sectors.

Investors also await the U.S. March core consumer price index (CPI) that is due later in the day. Economists expect the CPI, a measure of inflation, to remain unchanged at 0.2%, while core year-on-year CPI is expected show a rise of 2.1% from 1.8% in February.

In China, The People’s Bank of China (PBOC) set the fix rate of yuan against the dollar at 6.2911 versus the previous day’s 6.3071. The USD/CNY pair gained 0.02% to trade at 6.2836.

Xi’s non-confrontational remarks on Tuesday were a relief for the investors. Despite the warming Sino-U.S. trade relations, disputes remained to be resolved as China rejected a U.S. request to stop subsidizing technology-sensitive industries.

The PBOC’s governor Yi Gang said China will not devalue the yuan to deal with the trade disputes with the U.S., in response to reports this week that the country was considering a gradual depreciation of the yuan to offset the loss from any trade deals resulted from the disputes.

On a side note, China released lackluster inflation data on Wednesday morning, with consumer price index in March missing the estimated 2.6% to come in at 2.1% and producer price index slipping from the expected 3.2% to come in at 3.1%.

The USD/JPY pair shed 0.07% to trade at 107.11. Japan’s producer price index for March came in at 2.1%, in line with market expectation.

Elsewhere, the AUD/USD pair slipped 0.13% to trade at 0.7750. The Aussie reacted to the dismal Chinese inflation data. China is Australia’s largest trading partner, and the Chinese data may be a directional driver for the sentiment-linked Aussie.

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