U.S. Dollar slides as demand grows for emerging-market currencies 


The U.S. dollar slid Wednesday as hopes for easing trade tensions between the U.S. and China helped boost demand for emerging-market currencies.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, fell for a third consecutive session, slipping 0.3% to 89.5.

After a quiet overnight session, the dollar began falling near the start of U.S. trading—a move that picked up momentum after The Wall Street Journal reported that the U.S. is reaching out to China for a new round of trade talks.

Any improvement in the global trade climate is generally seen as good for emerging-market countries, which tend to be particularly vulnerable to trade disputes due to their export-heavy economies.

After months of heightened trade tensions, investors have had some cause for optimism recently, with the U.S. reaching a deal with Mexico about a revised North American Free Trade Agreement and reporting progress in its discussions with Canada.

In a separate development, investors are also cautiously optimistic that Turkey’s central bank will raise interest rates when it meets on Thursday, a move that many see as essential to restoring stability to an economy that has been at the center of concerns about emerging markets.

“I think the narrative is starting to change a bit,” said Mark McCormick, head of North American FX Currency Strategy at TD Securities. The news that the U.S. could resume talks with China “adds another layer to that, which favors buying currencies that look cheap,” he said.

The Turkish lira on Wednesday rose 1.3% to 6.3446 per dollar. The Chilean peso climbed 1.1% to 689.2 per dollar and the Mexican peso rose 0.9% to 19.0188 per dollar.

The dollar also fell 0.2% against the euro a day before the European Central Bank—at the conclusion of its latest policy meeting—is expected to confirm its intention to end its program of bond purchases in December.

Source: The Wall Street Journal – U.S. Dollar Slides as Demand Grows for Emerging-Market Currencies

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