October 17, 2019 / 12:09 AM / 2 months ago

FOREX-Dollar nurses losses; pound's fate tied to EU summit

* Dollar supported after overnight losses

* Pound on edge ahead of EU summit in Brussels

* Risk appetite cautious in absence of Sino-U.S. deal details

* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

By Tom Westbrook

HONG KONG, Oct 17 (Reuters) - The dollar found support on Thursday having weakened on lacklustre U.S. retail data, while the volatile pound was on edge as Britain and the European Union scrambled to secure a last-minute Brexit deal.

Sterling swung about a five-month high overnight, knocked around by a series of mixed headlines on the likelihood of progress at an EU leaders summit in Brussels later on Thursday.

It has surged some 5% since last week as negotiations stepped up, and sat in early Asian hours at $1.2816 per pound. The dollar was steady against most major currencies.

“I think we’re all grateful that we might be coming to some sort of an end to the recent saga,” said Nick Twidale, director of Sydney-based trade finance provider Xchainge.

“Anything that isn’t a hard Brexit is going to be positive for the sterling,” he said, adding a deal or something close to one could push the pound to $1.3500 or above.

Failure could drop it below $1.2200, Commonwealth Bank of Australia analyst Richard Grace said in a note.

Against the euro the pound also stood just under a five-month high at 0.8638 per euro.

The U.S. dollar had dropped on Wednesday as U.S. retail sales fell for the first time in seven months, painting a gloomy picture of the economy and making a case for rate cuts.

It was a touch weaker against the euro at $1.1074 and the Japanese yen at 108.69, but slightly stronger against the Australian and New Zealand dollars. Against a basket of currencies the dollar hit a month low of 97.898 overnight and was steady around that level on Thursday.

The Aussie weakened a fraction to $0.6755 after a senior Reserve Bank of Australia official said a national property downturn had proven a larger-than-expected drag on the economy.

However traders are focused on employment data due at 0030 GMT for the next read on the health of the labour market and the likely outlook for monetary policy.

“If the unemployment rate rises sooner than we expect ... this increases the risk that the RBA cuts the cash rate in November,” said National Australia Bank’s head of FX strategy, Ray Attril, who anticipates unemployment keeping steady.

Lingering worries about trade tensions between the United States and China have also kept investors’ risk appetite in check, weighing on the Aussie and other trade-exposed currencies.

Reports of a partial trade deal between the world’s two largest economies last week initially cheered markets, but a lack of details on the agreement has since curbed enthusiasm.

The New Zealand dollar drifted lower, following dovish comments from a top central banker on Wednesday, and sits at $0.6290, not far from a four-year low hit two weeks ago.

China’s yuan, which fell on Wednesday as new U.S. legislation backing pro-democracy protests in Hong Kong threatened to widen the rift between Beijing and Washington, weakened a little further.

In offshore trade the yuan eased marginally to 7.1004 per dollar. (Reporting by Tom Westbrook; Editing by Sam Holmes)

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