NEW YORK (Reuters) – The dollar was down modestly mid-morning on Tuesday, cooling what was its longest winning streak in two years, as investors put money in riskier assets on rising hopes of a breakthrough in U.S-China trade talks.
The dollar had gained for eight consecutive sessions as of Monday, the most since February 2017, according to Refinitiv data. The dollar index, which measures the currency against a basket of six rivals, was 0.13 percent lower on Tuesday at 96.935.
Top U.S. officials arrived in the Chinese capital on Tuesday ahead of high-level trade talks as the world’s two largest economies attempt to hammer out a deal ahead of a March 1 deadline to avoid another escalation of tariffs.
Washington is expected to keep pressing long-standing demands that Beijing make sweeping structural reforms to protect American companies’ intellectual property, end policies aimed at forcing the transfer of technology to Chinese companies and curb industrial subsidies.
“The multiday rally in the U.S. dollar abated amid tentative cooling in global risks,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
The dollar ceded ground to the euro, which was up 0.16 percent at $1.1294, and to the British pound, up 0.3 percent, last at $1.2888. Against the Japanese yen, another safe-haven currency, the dollar was little changed, slightly weaker at 110.45 yen.
The dollar earlier in the session had been trading higher as U.S. lawmakers reached a tentative agreement on border-security funding that might help avert another government shutdown, due to start on Saturday.
At the end of 2018, the dollar was the consensus short trade among hedge funds, as traders bet the U.S. Federal Reserve would pause in its rate increases and other major economies would grow quickly. But while the Fed held interest rates steady last month, the case for buying the euro and the pound has weakened steadily. Economic data in Europe has disappointed and Brexit concerns have dogged the British pound.
“It is remarkable for the dollar to post this kind of rising streak after a dovish Fed last month, and it shows how cautious investors are becoming over the outlook of the global economy,” said Lee Hardman, a currency strategist at MUFG in London.
On Jan. 30, the Fed said it would be “patient” before raising rates again and signalled its balance sheet would remain larger than previously expected.
Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh
Citi Economic Surprise Index: tmsnrt.rs/2TQOckB
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