Forex – U.S. Dollar Rises as Trump Says He is Undecided on Tariff Rollbacks

© Reuters.  © Reuters.

Investing.com – The U.S. dollar was higher on Friday as U.S. President Donald Trump confirmed that he plans to sign a trade deal with China, but had not yet decided if he would roll back tariffs.

China had stated Thursday that the two nations had agreed to phase out tariffs as part of the anticipated phase one trade agreement.

Trump said on Friday that he would not fully roll back tariffs, but that a deal could be signed with Chinese President Xi Jinping in Iowa by the end of the month, adding that China wants to make a deal.

The , which measures the greenback’s strength against a basket of six major currencies, jumped 0.2% to 98.180 as of 10:30 AM ET (14:30 GMT).

The safe haven Japanese yen was higher with down 0.1% to 109.17.

Elsewhere, sterling was flat just a day after the Bank of England left its key interest rate unchanged at 0.75% and cut its growth forecasts. was steady at 1.2809.

The euro continued to trade lower, with slipping 0.3% to 1.1019 after forecasts from the European Commission lowered expectations for any kind of stimulus in the struggling bloc.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Vietnam’s $5 Billion Plan to Neutralize Trump’s Tariff Threats

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Vietnam’s campaign to tamp down the Trump administration’s trade gap ire has come to a coastal commune better known for growing dragon fruit along one-lane potholed roads.

The community could soon be home to a $ 5 billion liquefied project that would include an import terminal and gas-fired power plant and eventually import billions of dollars of U.S. fuel into the country. It’s being fast-tracked with the blessing of Prime Minister Nguyen Xuan Phuc as part of a push to buy American products in Vietnam, where the Communist government has embarked on a crash course in modern U.S. politics.

“I’ve never seen the Vietnamese government move so quickly,” said John Rockhold, an engineer with 28 years experience shepherding infrastructure projects in Vietnam. He is country director of Energy Capital Vietnam, which is leading a consortium of companies backing the development on salt beds in southern Binh Thuan province. “I think they see LNG as a way of lowering the trade deficit the U.S. has with Vietnam. There is a lot of pressure from the White House right now.”

Indeed, the nation’s leaders are doing all they can to avoid China’s fate after President Donald Trump in June described Vietnam as “almost the single worst abuser of everybody” when asked if he wanted to impose tariffs on the nation. U.S. Trade Representative Robert Lighthizer “has a scoreboard: if you have a trade surplus with the U.S. of over $ 10 billion, you are in the middle of his dart board,” said Ernest Bower, president of Fairfax, Virginia-based Bower Group Asia, which advises businesses on operating in Southeast Asia.

Under pressure from the U.S., Vietnam is also cracking down on the fake labeling of Chinese goods being routed through the Southeast Asian country to bypass Trump’s tariffs.

Vietnam has become perhaps Asia’s biggest beneficiary of the U.S.-China trade war as companies including Nintendo Co (T:). and Alphabet (NASDAQ:) Inc.’s Google shift production to the country. So Vietnamese officials, from the politburo to local governments, are looking for ways to trim the nation’s trade surplus with the U.S., which hit $ 40 billion in 2018. That gap totaled $ 30 billion in the first seven months of this year, 39% higher than in the same period last year, according to U.S. Census Bureau data.

“If we buy more from the U.S., it will surely help boost our relationship with them,” said Mai Anh Tung, a government official in Binh Thuan province, where the LNG project involving companies such as General Electric (NYSE:) Co., KBR Inc. and Korea Gas is planned.

Coal, Engines

Vietnam’s Communist Party Secretary and President Nguyen Phu Trong is expected to visit the White House next month with a deal list for made-in-America products. Think natural gas from Texas, coal from Pennsylvania, pork from Iowa, and even aircraft engines — a shopping cart that could total billions of dollars. It’s no coincidence that many of these products come from regions that are important to Trump’s re-election hopes in 2020.

“They have hired trade advisers,” Bower said. “They’ve learned you have to have a game in Washington.”

This isn’t the first time Trump has pressured Vietnam on trade. The U.S. president prodded Vietnamese leaders to buy U.S. military equipment during his 2017 visit to the country, reminding his hosts that he would face re-election. Vietnam, which until 2016 was barred from buying U.S. military weapons systems, has received training from the U.S. on navigating America’s procurement process, said Tuong Vu, a professor of political science at the University of Oregon.

Vietnam’s one-party government can influence decisions of private companies, state-owned enterprises and local authorities, such as those overseeing the LNG project in Binh Thuan province, 212 kilometers (132 miles) northeast of Ho Chi Minh City. The project will buy U.S. LNG, though discussions with suppliers haven’t begun yet, Rockhold said.

“If private companies support the policies of the government, the government can support the private companies in other ways,” said Le Dang Doanh, a Hanoi-based economist and former government adviser. “All the tycoons in Vietnam are well-connected with the leadership of the government.”

In fact, Phuc hasn’t been shy about his U.S. shopping spree. He made a beeline for the U.S. president at the Group of 20 summit in Japan for an impromptu huddle, promising to buy “large volumes” of LNG. The country’s total LNG demand is estimated to reach 4 million tons a year by 2030, according to BloombergNEF analysts. Importing all of that fuel from the U.S. — valued at about $ 1.5 billion a year — would equal 3.7% of the country’s 2018 trade surplus with America.

This month Liquefied Natural Gas Ltd. announced a non-binding term sheet that could lead to the first deal to supply U.S. gas to Vietnam for a Mekong Delta power plant. The agreement, which could result in $ 30 billion of exports from the U.S. over the 25-year project, would “help balance Vietnam’s trade surplus with the U.S.,” Singapore-based Delta Offshore Energy PTE LTD, which plans to build the plant, said in a press release.

Phuc in a January interview promised that his country would buy more Boeing (NYSE:) Co. aircraft. A month later, during Trump’s visit to Hanoi to meet with North Korean leader Kim Jong-Un, Vietnam’s Bamboo Airways and VietJet Aviation JSC signed agreements to purchase 110 Boeing jets. State-owned Vietnam Airlines JSC says it is considering an order for 50-100 737 Max.

“Doing business with U.S. partners is safe and it can help develop the relationship between Vietnam and the U.S.,” Bamboo Airways Chairman Trinh Van Quyet said.

In August, state-run Vietnam National Coal-Mineral Industries announced it was negotiating to buy U.S. coal for the first time from Xcoal Energy & Resources LLC, which is based in Pennsylvania, a state expected to play a pivotal role in the 2020 election and which Trump won in 2016.

Pork Shortage

Meanwhile, Nestor Scherbey, a licensed U.S. customs broker and consultant based in Ho Chi Minh City, is working with U.S. meat suppliers to help fill an estimated 500,000-ton pork shortage — valued at $ 1.29 billion — expected between now and the Tet Lunar New Year amid a swine fever epidemic that has reduced Vietnam’s hog population.

“You’ll start seeing things like packaged ham shipped from Texas in Vietnam supermarkets,” he said.

Vietnamese consumers already favor American products. The nation imported more than $ 3.1 billion in U.S. electronics, such as iPhones and Dell Technologies Inc. laptops, in the first eight months of the year, a 52% increase from last year, according to government statistics. U.S. vegetable and fruit imports have soared 72% as Washington Gala apples and Thompson seedless grapes are showing up in supermarket checkout lines.

Still, with an average annual per capita income of 58.5 million dong ($ 2,522), boosting other pricey imports isn’t a given. Alaskan lobster, which sells for the equivalent of $ 56 per kilogram in Ho Chi Minh City, and Ford Motor (NYSE:) Co.’s Explorer sport utility vehicle, with a price tag of about $ 97,700 in Vietnam, are out of reach for most Vietnamese consumers.

Vietnam’s efforts to boost imports from the U.S. faces another complication: Trump’s decision to exit the 12-nation transpacific trade deal. The pact will eventually slash 90% of tariffs from nations such as Australia, New Zealand, Japan and Canada — putting U.S. exports at a disadvantage, said Fred Burke, managing partner at the law firm Baker McKenzie.

“Many of the most significant tariff reductions will begin taking effect in the run-up to the presidential election in the U.S.,” he said.

(Updates with crack down on fake labels on Chinese goods in fifth paragraph)

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Forex – Dollar Down vs Havens, Up vs High-Yielders on Tariff News

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Investing.com — The dollar fell against safe havens such as the and in early trading in Europe Friday, but was higher against most other currencies after President Donald Trump announced a sharp escalation of the U.S.’s trade war with China.

The yen had its best day against the dollar in two years on Thursday after the announcement of a new 10% tariff on $ 300 billion worth of imports from China. By 3 AM ET (0700 GMT), it was at 106.95 to the dollar, having risen to its highest since April 2018 against the greenback earlier.

The dollar was also lower against the franc at 0.9880, as traders unwound carry trades in a broad risk-off move across all markets.

Trump’s shattered a fragile truce with China over trade that had been hastily put in place ahead of the G20 summit a month ago. It represents a sharp escalation of the conflict, by extending tariffs to effectively all U.S. imports from China. As such, the risk of them feeding through to higher prices for U.S. consumers is markedly higher.

Analysts from the Peterson Institute in Washington estimated that the move will raise the average tariff on Chinese products to 21.5%, from barely 3% in 2017 when Trump took power.

Trump’s move came only a day after Federal Reserve chairman Jerome Powell had pointed to the trade dispute as the biggest single risk facing the U.S. and global economies – observations that drew criticism from Trump show said that Powell had “let us down.”

“Ironically the Fed’s easing gives the President the breathing space to now play hard ball,” Megan Greene, a senior fellow at the Harvard Kennedy School, said via Twitter.

The dollar surged against high-yielders overnight, hitting a 10-year high against the and rising sharply against the and . It also surged 1% against the , although China’s central bank restrained the drop in the .

The impact on the and was less severe, although reports that Trump may make an announcement on trade with the EU later Friday added to the general sense of unease.

The , which tracks the greenback against a basket of currencies, hit its highest level since May 2017 at 98.697 overnight, before retracing to 98.105 in European trading.

The escalation of the trade war threatens to overshadow what would normally be the main event of the monthly economic calendar – the release of the U.S. labor market report for July. growth is expected to have slowed to 160,000 from 224,000 in June.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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What Analysts Are Saying About Trump’s Fresh China Tariff Threat

(Bloomberg) — China’s yuan is likely to test the 7 per dollar level sooner than previously expected after Donald Trump’s abrupt decision to escalate the trade war, which could also prompt more easing by Beijing to support the economy, analysts say. The threat will weigh on stocks too, presenting buying opportunities if the benchmark falls below a key level, they said.

The yuan fell as much as 0.76% to 6.9394 per dollar Friday morning, its weakest since November, while the dropped 2% to 2,851.44, the lowest in nearly two months. Technology stocks were among the hardest hit. The yield on 10-year Chinese government bonds slid 4 basis points, the most in a month, to 3.11%.

Chinese Stocks Slide With Yuan as Trump Shatters Market Calm

Here’s a roundup of views from analysts:

“Expectations that the yuan will remain stable are shattered,” said Zhou Hao, a senior emerging market economist at Commerzbank AG (DE:) in Singapore. “Once the era of low volatility has ended, many traders will have to stop loss. Investors will test the PBOC’s resolve to defend 7 today or in the coming days.”

“The risk of the yuan breaking 7 has risen visibly” and could happen any time, said Christy Tan, head of markets strategy at National Australia Bank Ltd. in Singapore. The central bank won’t allow disorderly movements in the currency.

Beijing may be tempted to allow further depreciation to support growth, said Ken Cheung, a senior Asian FX strategist at Mizuho Bank Ltd. The Politburo’s emphasis on stability means China is likely to keep a smooth pace of depreciation, and given concerns over capital outflow risk, “we do not expect the to breach the 7 handle immediately.”

RATES

The odds have built for more Fed rate cuts, while China’s economic growth will likely drop below 6% next year, said Koon How Heng, head of markets strategy at United Overseas Bank Ltd. “I’m not so worried about Chinese outflows, but this may well intensify the relocation of manufacturing capital away from southern China into various ASEAN countries like Vietnam, Thailand, Malaysia and Indonesia,” he said.

The escalation in trade tension adds downside risk to growth, which is generally bond supportive, said Frances Cheung, head of Asia macro strategy at Westpac Banking Corp. “More importantly, China is likely to focus on supporting domestic growth and the market may expect more liquidity and credit support,” she said. “The yield differential remains favorable for China government bonds.”

The new tariffs impact the growth outlook much more, because many high-tech consumer goods are included, said Zhaopeng Xing, a markets economist at ANZ Bank China, adding that the yield on China’s 10-year government bond could fall another 10-15 basis points to 3.0%.

STOCKS

Most people were expecting some compromise in the latest round of trade talks, said Banny Lam, head of research at Ceb International Inv Corp. Selling pressure could be more intense as it is Friday and investors are uncertain about what may happen over the weekend. “China should be really tough in response to the U.S. moves,” he said.

There’s a higher likelihood that China will use fiscal tools over the weekend to bolster confidence, said Wang Zhihong, managing director at Whiterock Asset Management Co. “We will increase our short position on industrial commodities,” he said.

It could be an opportunity to buy if the Shanghai Composite falls below 2,700, especially consumer and infrastructure-related stocks, said Kenny Wen, strategist at Everbright Sun Hung Kai Co. “The Chinese government may boost infrastructure spending and tax cuts to boost domestic consumption to offset the tariff impact.”

Sun Jianbo, president of China Vision Capital Management in Beijing, said he’s waiting to bottom fish consumer electronics stocks after the tariff news. “The trade war is going to last for a while, so our internal consensus has always been buying stocks after the tensions ratchet up and selling after it cools down a bit. Things can’t go too extreme on either side.”

“There’s no need to get over-pessimistic as the U.S. can’t afford to lose the China market and the trades will go on even after more tariffs,” Sun said. “Stocks in the consumer electronics supply chain will drop for sure, but as long as their earnings growth potential remains intact, we would start buying after the correction.”

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Forex – U.S. Dollar, Mexican Peso Fall on Trump Tariff Threat

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Investing.com – The U.S. dollar fell, while the Mexican peso continued to slump, after U.S. President Donald Trump threatened to impose a 5% tariff on all Mexican goods if Mexico did not crack down on migration.

The , which measures the greenback’s strength against a basket of six major currencies, lost 0.4% to 97.667 by 10:41 AM ET (14:41 GMT), while jumped 2.7% to a nearly five-month high of 19.6689.

Trump said via Twitter that he will impose the tariff on June 10 and that it will last and increase until illegal immigration is stopped.

Meanwhile, the greenback was also held back by data showing a rise in inflation, supporting the case for the Federal Reserve to keep interest rates unchanged.

The (PCE) price index increased 0.3% last month, the biggest gain since January 2018. The core PCE rose 0.2%. Separate data showed that consumer spending is slowing after a temporary boost during the first quarter.

The dollar was lower against the safe-haven Japanese yen, with falling 0.9% to 108.61

Elsewhere, the euro surged on the weaker dollar, with up 0.4% to 1.1173, while cable rose 0.2% with at 1.2630

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Dollar firm vs yen; market shrugs off China tariff hike, awaits talk results

© Reuters. FILE PHOTO: An employee counts U.S. dollar bills at a money exchange office in central Cairo © Reuters. FILE PHOTO: An employee counts U.S. dollar bills at a money exchange office in central Cairo

By Shinichi Saoshiro

TOKYO (Reuters) – The dollar was steady against the safe-haven Japanese yen on Friday, taking in stride the hike in U.S. tariffs on Chinese goods that went into effect and awaiting resumption of talks between top officials of the world’s two largest economies.

U.S. President Donald Trump’s tariff increase to 25 percent from 10 percent on $ 200 billion of Chinese goods kicked in on Friday, and Beijing said it would strike back, increasing tensions as the two sides pursue last-ditch talks to try salvaging a trade deal.

U.S. and Chinese officials will return to the negotiating table later on Friday.

“The tariff hike going into effect wasn’t a surprise in itself,” said Shusuke Yamada, chief Japan FX and equity strategist at Bank Of America Merrill Lynch.

“The market is now waiting to see if the two sides reach a compromise, continue with their brinkmanship or whether the negotiations fall through altogether.”

The dollar stood little changed at 109.720 yen .

The U.S. currency, which slipped to a three-month low of 109.470 overnight, has lost 1.2 percent against the yen this week.

“The dollar is clearly on a downtrend against the yen, both in terms of technicals and flows,” said Yuki Ishizuki, senior currency strategist at Dalian Securities.

But as the market had been bracing for the U.S. tariff increase, and given underlying demand for greenbacks Japanese institutional investors, “the dollar may not have much further room to fall,” he said.

Against the Swiss franc, the dollar was a shade weaker 1.0140 after dropping roughly 0.5 percent the previous day, when it touched a one-month low of 1.0122 francs.

The yen and franc tend to attract demand in times of market turmoil and political tension.

The euro added 0.15 percent to $ 1.1229 after touching a one-week peak of $ 1.1251 the day before.

The against a basket of six major currencies, of which the euro is a main component, was little changed at 97.353 .

The index had slid to 97.238 on Thursday, its lowest since May 1, as U.S. Treasury yields declined as investors shied away from risk, weighing on the dollar this week.

The Australian dollar , sensitive to shifts in risk sentiment, was up 0.05 percent at $ 0.6990 after reaching as high as $ 0.7019. The was down 0.5 percent for the week, during which it brushed a four-month low of $ 0.6960.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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