The dollar gained for a second consecutive day as fading hopes over the latest China-U.S. trade truce prompted traders to buy the greenback after a selloff last week.
The greenback had come under selling pressure recently. The combination of some indifferent U.S. data and hopes of a breakthrough in a protracted trade conflict between Washington and Beijing prompted funds to unwind some of their extreme dollar long bets.
Reports of a “Phase 1” trade deal between the United States and China last week had earlier cheered markets. But the lack of details around the agreement has since curbed this enthusiasm. Oil prices extended declines and the safe-haven yen held gains versus dollar.
According to IMF the U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis. The International Monetary Fund warned that the outlook could darken considerably if trade tensions remain unresolved.
Against a broad basket of its rivals, the dollar strengthened for a second day and was up 0.1% to 98.55. Greenback was around 1% away from a near 2-1/2 year high of 99.67 hit earlier this month.
Forex – Fading hopes over a trade pulled dollar
A monthly survey showed the mood among German investors worsened less in October than expectations. But the euro failed to get much of a boost from the data with the single currency down 0.2% at $1.1007.
Elsewhere, sterling trimmed some of its earlier gains as officials raced towards putting a Brexit deal in place by the end of Tuesday. The pound was up 0.3% at $1.2646, after being up nearly 0.7% in early London trading. The British currency was up 0.5% at 87.085 against the euro.
Hopes that a deal might be thrashed out at the Oct. 17-18 EU summit drove sterling to its best week since 2017 last week. It fell on Monday as it became clear the two sides were still far apart.