Dollar gains as investors book profits on short positions

NEW YORK (Reuters) - The dollar rose on Monday, after five straight days of losses, with investors more guarded despite increased risk appetite that pushed U.S. stocks and Treasury yields higher on hopes of a U.S.-China trade deal.

FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo

The dollar last week had fallen as a safe haven as trade deal expectations with China improved and U.S. economic data showed more stability, particularly with Friday’s generally upbeat U.S. non-farm payrolls report for October.

“We have seen a little bit of profit-taking on recent short dollar positions,” said Edward Moya, senior market strategist, at OANDA in New York. “There is a growing belief that we are at a major turning point in the euro to go higher against the dollar as we wait for a key catalyst.”

But the greenback’s outlook remained bright, especially as the Federal Reserve signaled a pause in its rate-cutting cycle last week, indicating that it would be more data-dependent when evaluating monetary policy going forward.

U.S. Commerce Secretary’s Wilbur Ross’ optimism overnight that a preliminary deal would be signed with China this month added to increased risk appetite.

Licenses for U.S. companies to sell components to China’s Huawei Technologies Co “will be forthcoming very shortly,” Ross said in an interview with Bloomberg published on Sunday. He noted the U.S. government had received 206 requests for licenses.

In May, Huawei, the world’s largest telecoms equipment provider, was put under a U.S. blacklist citing national security concerns.

An index that tracks the dollar against six major currencies .DXY was last up 0.3% at 97.547.

The euro, meanwhile, fell against an overall strong dollar, down 0.3% at $1.1127 EUR=.

Analysts though said that things are looking up for the euro, which traded not too far from its highest levels in weeks after Ross said in the interview that Washington may not slap tariffs on imported vehicles after “good conversations” with automakers in the European Union, Japan and Korea.

Tariffs have already been delayed once by six months, and trade experts say that could happen again.

European Central Bank President Christine Lagarde delivered her first address as ECB chief on Monday, but did not make a comment on monetary policy.

In other currencies, the dollar rose 0.4% against the yen to 108.61 yen JPY=. Against the Swiss franc, another safe haven, the dollar was up 0.2% at 0.9879 franc CHF=.

The Chinese yuan rose to a 12-week high of 7.0225 against the greenback in the offshore market as risk sentiment continued to improve. CNH=EBS

World stock markets rallied, denting demand for safe-haven investments, after the world’s two largest economies both said on Friday they had made progress in trade talks. U.S. officials said a Phase-1 deal could be signed this month.

Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Olga Kotaga in London; Editing by David Gregorio and Alistair Bell