On Monday, the greenback increased to a two week peak compared to the yen, with the market breathing a sigh of relief as the closely observed two-day U.S. –Japan summit held over the weekend was perceived to have ended easily, which was better than expected, 12:29AM ET.
“U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe seemed to have established a quick friendship through a hug, a prolonged handshake and rounds of golf, allaying investor fears of the meeting ending acrimoniously with Trump talks tough on trade, currency and security issues,” according to the report.
At the meeting, Abe and Trump also decided to hold an economic dialogue after Trump withdrew the U.S. from the Trans-Pacific Partnership agreement.
Market sentiment was also increased after Trump agreed to honor the “one China” policy during a phone call with China’s leader Xi Jinping.
The dollar index against a basket of major currencies increased 0.15% at 100.930 (DXY), close to a near two-week peak of 101.010 reached on Friday when pledges of “phenomenal” tax reforms by Trump had increased the greenback.
The greenback increased 0.65% at 113.920 yen, temporarily touching 114.170, the highest since Jan. 30.
“There is relief that the summit ended without confrontation, and that the joint statement did not directly touch upon currency issues,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.
There was worry prior to the summit that Trump would reiterate accusations that Japan was one of many countries diminishing their currencies to the disadvantage of the United States.
“While the outcome of the U.S.-Japan summit itself is not a huge dollar boosting factor, the currency continues to receive firm support from expectations towards Trump’s ‘phenomenal’ tax plans,” Yamamoto said.
During a meeting with airline executives on Thursday, Trump stated his administration would be announcing “something phenomenal in terms of tax” within “the next two or three weeks.”
The president’s remarks increased risk appetite, making Wall Street shares to record highs on Friday, in turn lifting U.S. Treasury yields from multi-week lows to the dollar’s advantage.
The market’s short term concentration was on Fed Reserve Chair Janet Yellen’s congressional testimony set for Tuesday and Wednesday. Investors are keen to measure Yellen’s policy stance after the central bank upgraded its inflation outlook earlier this month.
“Trump has just taken a positive approach to tax reforms and infrastructure spending. It remains to be seen if this has any impact on Yellen, as the Trump administration’s lack of policy clarity seemed like a factor that made the Fed hesitant to raise rates,” said Koji Fukaya, president at FPG Securities.
U.S. indicators being expected for their potential market effect, included the January producer price index (PPI) on Tuesday, the January consumer price index (CPI) and retail sales on Wednesday and housing-related data on Thursday.
Last week, the common currency declined 1.3 percent, its biggest weekly loss in three months, as a political danger increased on the back of election concerns in countries like France and Germany. Resurfacing Greek debt, grief further hurts confidence towards the euro zone.
Somewhere else, the New Zealand dollar edged up 0.1% to $0.7203. On Thursday, it continued to edge away from a 2-1/2-week low of $0.7172 struck, after the Reserve Bank of New Zealand (RBNZ) indicated that it would keep interest rates at record lows for two years.
“The RBNZ is clearly knocking the New Zealand dollar lower. However, we still find it difficult to get overly bearish given a still solid economic picture,” wrote Philip Borkin, senior economist at ANZ.
The Australian dollar slightly changed at $0.7671 after increasing 0.7% on Friday on upbeat Chinese trade data and a positive economic outlook given by the Reserve Bank of Australia. An increase above $0.7696 would take the Aussie to a three-month peak.
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