NEW YORK (Reuters) - The U.S. dollar slipped on Monday and the Japanese yen weakened to a three-month low against the greenback as optimism that the U.S. and China will reach a trade deal reduced demand for safe haven currencies, and as investors waited on the Federal Reserve’s meeting this week.
U.S. President Donald Trump said on Monday he expected to sign a significant part of the trade deal with China ahead of schedule but did not elaborate on the timing.
The comments come after the U.S. Trade Representative’s office and China’s Commerce Ministry said on Friday that U.S. and Chinese officials are “close to finalizing” some parts of a trade agreement, with talks to continue.
The trade war between the U.S. and China has been blamed for adding to global economic weakness, which in turn has prompted central banks globally to cut rates.
“Positive trade headlines continue to support our view that trade tensions are easing,” said Win Thin, global head of FX strategy at Brown Brothers Harriman.
The dollar index against a basket of six major currencies .DXY fell 0.07% to 97.760. The yen weakened as far as 109.03, the weakest since Aug. 1. The Australian dollar AUD=, which is highly sensitive to the Chinese economy, rose 0.25% to $0.6839 U.S. dollars.
Hopes that Britain will reach a deal to leave the European Union, and avoid a disorderly exit, also boosted risk sentiment on Monday.
The European Union on Monday agreed to a potential three-month Brexit delay as Prime Minister Boris Johnson sought a snap election to secure a majority capable of passing his divorce deal.
The major U.S. focus this week is the Federal Reserve meeting. The U.S. central bank is expected to cut rates when it concludes its two-day meeting on Wednesday, though investors will be watching for any indication that further cuts are likely.
Fed policymakers are deeply divided on whether the U.S. central bank should continue cutting rates.
“There’s still an awful lot of discrepancy and uncertainty in the markets as to what the Fed will do next year,” said Jane Foley, senior FX strategist at Rabobank. “The market will be looking for clues as to which way that might go.”
Additional reporting by Elizabeth Howcroft in London; Editing by Chizu Nomiyama and Alistair Bell