May 4, 2020 / 2:34 PM / 21 days ago

FOREX-Dollar gains on renewed U.S.-China trade tension

    * Euro, sterling, fall vs dollar
    * Biggest move in Chinese yuan vs dollar
    * U.S. factory orders drop more than expected
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Adds new comment, U.S. data, updates prices, changes byline,
dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 4 (Reuters) - The U.S. dollar rose on Monday,
boosted by safe-haven flows as risk appetite waned amid fears
that last year's U.S.-China dispute will be reignited, this time
over the novel coronavirus. 
    U.S. President Donald Trump and Secretary of State Mike
Pompeo have pinned the blame for the pandemic on China, where
the new coronavirus outbreak is believed to have originated.
    The latest salvo came from Pompeo on Sunday, who said there
was "a significant amount of evidence" that the virus emerged
from a laboratory in the central Chinese city of Wuhan.

    "The dollar is outperforming and it's on the back of the
risk-off sentiment stemming from U.S.-China tensions," said Ed
Moya, senior market analyst at OANDA in New York. 
    In late morning trading, the dollar index was up 0.3% at
99.511, rising for a second straight day.
    The dollar extended gains after data showed new orders for
U.S.-made goods fell more than expected in March, dropping
10.3%. Economists polled by Reuters had forecast factory orders
tumbling 9.7% in March.
    The euro fell 0.6% to $1.0913, while sterling slid
0.3% to $1.244.
    "Many investors are getting skeptical about the rebound we
saw in risk appetite since the March 23rd low in stocks,"
OANDA's Moya said. "You'll see investors become extremely
conservative and we'll see a steady stream of safe-haven flows,
which should benefit the dollar."
    The biggest move in the currency markets was the Chinese
yuan, which fell to a six-week low of 7.1555 against the dollar
in the offshore market. The dollar was last little
changed at 7.1334, but if the yuan falls again, the next levels
to watch would be the mid-March low of 7.1651 and
early-September low of 7.1975.
    Analysts were debating how the United States might attack
China again - with more trade tariffs or even canceling the
payments on U.S. Treasuries that China owns - but they all
agreed the dollar/yuan cross would see higher volatility. 
    "A re-escalation in U.S.-China trade tensions has the
potential to bring an end to the relative stability in USD/CNY,"
said Lee Hardman, a forex strategist at MUFG. 
    The moves extended a dour start for May, which began with 
Friday's bleak U.S. data and the threat of a fresh trade-war
between the world's two biggest economies.
    Pompeo did not provide evidence, or dispute a U.S.
intelligence conclusion that the virus was not manmade. But the
comments double down on Washington's pressure on China as U.S.
deaths and economic damage mount.
    The dollar was modestly up against the yen, another
safe-haven currency, trading 0.1% higher at 106.965 yen 
.
    With signs pointing to a stronger dollar, speculators cut
slightly their net short positions on the U.S. currency against
G10 currencies to $9.39 billion in the week to April 28 from
$10.67 billion in the week prior to that, when they reached a
near two-year high.
    
========================================================
    Currency bid prices at 10:25AM (1425 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.0911        $1.0983     -0.66%         -2.67%      +1.0980     +1.0911
 Dollar/Yen       JPY=        107.0300       106.9300    +0.09%         -1.68%      +107.0600   +106.6800
 Euro/Yen         EURJPY=     116.81         117.39      -0.49%         -4.21%      +117.3900   +116.6200
 Dollar/Swiss     CHF=        0.9655         0.9612      +0.45%         -0.24%      +0.9659     +0.9614
 Sterling/Dollar  GBP=        1.2422         1.2502      -0.64%         -6.31%      +1.2502     +1.2406
 Dollar/Canadian  CAD=        1.4091         1.4084      +0.05%         +8.51%      +1.4151     +1.4051
 Australian/Doll  AUD=        0.6405         0.6418      -0.20%         -8.77%      +0.6433     +0.6373
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0539         1.0552      -0.12%         -2.89%      +1.0563     +1.0535
 Euro/Sterling    EURGBP=     0.8782         0.8783      -0.01%         +3.88%      +0.8814     +0.8773
 NZ               NZD=        0.6020         0.6067      -0.77%         -10.63%     +0.6062     +0.6009
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        10.3810        10.2090     +1.68%         +18.26%     +10.4740    +10.3517
 Euro/Norway      EURNOK=     11.3337        11.3550     -0.19%         +15.22%     +11.4649    +11.3255
 Dollar/Sweden    SEK=        9.8860         9.8391      -0.16%         +5.76%      +9.9395     +9.8131
 Euro/Sweden      EURSEK=     10.7927        10.8095     -0.16%         +3.08%      +10.8689    +10.7947
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Olga Cotaga in London; Editing by Jonathan Oatis)
  
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