U.S. Markets

Yen falls as global tensions abate, sterling rises

NEW YORK (Reuters) - The yen slipped on Thursday as global tensions including the U.S.-China trade conflict showed signs of thawing, bolstering investor confidence and reducing demand for safe-haven currencies.

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 pound rose to its highest level against the dollar in more than a month on hopes that a no-deal Brexit would be avoided.

“Funding currencies are in retreat on a ratcheting down of tensions on a global basis,” said Karl Schamotta, director of global markets strategy at Cambridge Global Payments in Toronto.

The most notable development was China and the United States agreeing on Thursday to hold high-level talks in early October in Washington. That stoked hopes the world’s biggest economies would move toward a deal to resolve their trade differences.

Their heated rhetoric and tit-for-tat tariffs have rattled investors and their outlook on the global economy since this summer.

“That’s very positive since it’s been so tumultuous for markets the past few months because of the trade war,” Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California, said of the October trade talks.

In late U.S. trading, the dollar JPY=EBS was up 0.53% at 106.975 yen after reaching 107.235 yen, which was its highest level since late July.

Against the euro, the yen EURJPY=EBS was 0.5% lower at 118.015 after falling to 118.6, marking a three-week low versus the common currency.

The dollar was 0.04% weaker versus a basket of currencies .DXY on lower safe-haven demand, but its losses were limited by some encouraging news on the U.S. labor market and service sector.

Payroll processor ADP said U.S. companies hired 195,000 workers in August, which exceded the 158,000-worker increase that analysts polled by Reuters had forecast.

Traders and analysts await the government’s monthly payrolls report due at 8:30 a.m. (1230 GMT) on Friday as a confirmation of resilience in the labor market.

Sterling continued its rally after British lawmakers approved legislation on Wednesday to extend the Brexit deadline for the third time and rejected Prime Minister Boris Johnson’s motion to hold a snap election.

The pound GBP=D3 was last trading up 0.60% at $1.2327, moving further from a three-year low reached on Tuesday.

Against the euro, sterling EURGBP=D3 gained 0.57% to 89.52 pence after touching a near six-week high of 89.49 pence.

Among other major currencies, the Swedish crown jumped after Riksbank, the country’s central bank, said it still expected to tighten monetary policy around the turn of the year, surprising markets and sparking big gains in the long-suffering currency.

The Swedish crown reached a two-week high of 10.6575 against the euro EURSEK=D3, and rose 0.44% to 9.693 to the dollar SEK=D3.

Additional reporting by Olga Cotaga in LONDON; Editing by Toby Chopra and Tom Brown