Chinese yuan increased by 0.1% to 7.087 against the U.S. dollar an offshore trading on Friday. U.S. and Chinese trade representatives discussed the phase one trade deal and came to an agreement, causing the yuan’s jump. The United States declared that both sides expect obligations to be met, while China agreed to improve the atmosphere for its implementation.
The Australian dollar also gained 0.3% to $0.6514 after hitting a one-week high earlier. The currency climbed up after the country’s government announced that it would ease social distancing restrictions in a three-step process.
However, some analysts fear that Aussie will lower again. According to Thu Lan Nguyen, the Commerzbank analyst, it’s unclear how deep “the collapse of the economy” in Australia is or when the country will recover.
It seems investors’ risk appetite is growing as more governments are reopening their economies. Currencies linked to global trade also gained on Friday. News about the U.S. and Chinese negotiators agreeing to strengthen cooperation over a trade deal boosted their respective currencies.
What about the Euro and U.S. Dollar?
The sterling gained in thin trading, rising by 0.1% to $1.2376 on Friday. The euro also edged up by 0.1% at $1.0839. However, the currency is still down more than 1% from the recent high. Traders worry about a German court ruling that could jeopardize the ECB’s bond-buying scheme.
On the other hand, the U.S. currency struggled. The dollar’s index tumbled down by 0.1% at 99.758 against a basket of six other major currencies. But it increased against the Japanese yen.
Ebrahim Rahbari, the chief G10 FX strategist at Citi, stated that the possibility of negative interest rates is slightly bearish for the dollar, given limited market pricing to date and ongoing concerns about the U.S. “debasing” the greenback.
Still, traders hope that an aggressive U.S. stimulus will boost the recovery in the United States and pull in capital flows while supporting the dollar.