Australian dollar declined along with New Zealand dollar

The Australian dollar tumbled down from a 15-month peak, lowering to $0.715. The New Zealand dollar traded at $0.6678, slightly below from Wednesday’s six-month high.

The forex market is still trying to ascertain whether the jump in geopolitical tension will be enough to derail the positive vibes – stated Rodrigo Catril, the senior FX strategist at National Australia Bank in Sydney. He referred to the U.S.-China dispute.

According to Catril, the recent history shows that the market may tend to digest this stuff and carry on in its merry way. But some caution is warranted, and traders need to keep an eye on the Chinese yuan.

Meanwhile, the Euro traded at $1.1580 on Thursday. It was lower by 0.2% from a 21-month high of $1.1601, which the currency hit overnight after Europe’s leaders agreed on a coronavirus rescue package.

How did U.S. dollar fare?

The dollar gained a little, barely rising from a four-month low versus a basket of currencies. It last stood at 94.931. Despite that, the greenback held on to gains against the Chinese yuan, as heightened Sino-U.S. tensions kept currency markets cautious.

The Chinese yuan collapsed to its lowest point in nearly two months on Wednesday, while the dollar found support in Asia on Thursday. The United States gave China time until Friday to close its consulate in Houston due to accusations of spying. President Donald Trump declared that it is always possible to order other Chinese missions to close as well.

China said that it would retaliate. While analysts expect China to issue some kind of reply, they don’t think it will derail the trade deal, which is the main focus for forex markets.

According to Johanna Chua, the Citi strategist in Hong Kong, the Phase One trade deal will likely hold into the U.S. election. However, the market may shift its attention to China’s relative economic outperformance.