TOKYO, Aug 28 (Reuters) - The dollar remained near one-month lows against the euro on Tuesday, but gained against the yen after a U.S.-Mexico deal aimed at overhauling the North American Free Trade Agreement boosted appetite for riskier assets.
The agreement put pressure on Canada to consent to new terms in order to preserve a three-nation pact, which could revive economic uncertainty caused by U.S. President Donald Trump’s repeated threats to ditch the 1994 accord.
However, Ayako Sera, Tokyo-based market strategist at Sumitomo Mitsui Trust Bank, said the U.S.-Mexico deal slightly eased concerns about an escalation of international trade tensions for now.
“It isn’t the case that the trade problems between Mexico and the United States have been completely solved. Going forward, Canada will become involved, so there are still parts that are hard to predict,” Sera said.
“Sino-U.S. trade problems haven’t been solved yet and it remains unclear what Canada will do in relation to the agreement.”
As of 0435 GMT on Tuesday, the euro held onto most gains made over the past few days, trading at $1.16735. It touched as high as $1.16975 in early trading, its highest level since Aug. 1, before paring some gains.
The common currency extended five days of gains against the Japanese yen during which it has risen about 2.7 percent.
As of 0435 GMT, it was about 0.1 percent higher at 129.89 yen per euro, giving up some gains after reaching as high as 130.05 yen.
The dollar also rose against the yen, gaining about 0.2 percent to 111.26 yen per dollar.
Shusuke Yamada, currency and equity strategist at Bank of America Merrill Lynch in Tokyo, said a de-escalation of trade tensions tends to be negative for the safe-haven yen, while supporting cross-yen trades. “Cross-yen pairs like euro/yen...have been a function of risk assets,” Yamada said.
The dollar index, which measures the greenback’s performance against six other currencies, was slightly higher at 94.846, paring losses after reaching its lowest level since Aug. 2 in early trade.
The dollar has fallen more than 2 percent since hitting a high not seen in over a year on Aug. 15, amid U.S. President Donald Trump’s criticism of the Federal Reserve for raising interest rates at a time when the U.S. government was trying to stimulate the economy.
The Canadian dollar was 0.15 percent higher at $1.2974 after slipping almost half a percent on Monday.
The Mexican peso was about 0.4 percent lower at 18.853 per dollar, giving up some gains from the previous day.
On Monday, the peso closed about 0.8 percent higher after initially rising about 1.2 percent on the news that the United States and Mexico had reached agreement.
China’s offshore yuan traded about 0.2 percent lower at 6.8095 per dollar as of 0445 GMT.
It was not far off 6.7818, its strongest level since July 31, which was touched on Monday after the central bank late last week revived a “counter-cyclical factor” in its daily fixing to support the currency. (Reporting by Daniel Leussink Editing by Eric Meijer and Sam Holmes)