Fundamental Comment

Dollar retreats as US-China deal looks elusive

Dollar retreats as US China deal looks elusive

The U.S. dollar fell on Wednesday, amid lower chances of seeing a trade deal between the U.S. and China this week as tensions between the two sides simmered even before the beginning of negotiations.

The U.S. decided to blacklist 28 Chinese companies for violations against Muslim minorities and put visa restrictions for Chinese officials for the same reason, while China warned of retaliating.

As of 08:01 GMT, the U.S dollar index, which measures the performance of six major currencies against the greenback, eased from the session high of 98.86 to trade at lower 98.69, after two consecutive days of gains.

The U.S. announced yesterday visa restrictions for Chinese officials in response to the detention or abuse of Muslim minorities, after it had already blacklisted 28 Chinese companies for their alleged involvement in the treatment of Uighur ethnicities in Xinjiang Province.

China's Commerce Ministry responded quickly, asking Washington to abandon its sanctions and stop making "irresponsible statements." It also threatened to take "necessary measures" to protect Chinese interests.

Reuters is reporting that China is considering blocking US visitors with “anti-China links” from getting visas.

These negative developments come hours before the Chinese trade delegation visits the United States for a new round of trade talks.

U.S. and Chinese trade lawmakers are expected to meet in Washington ahead of high-level talks involving Chinese vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday.

Fed Powell in focus

Federal Reserve Chairman Jerome Powell will be in focus today as he participates in a panel discussion at a Fed Listens event hosted by the Federal Reserve Bank of Kansas City.

Powell said on Tuesday the Federal Reserve would soon increase the size of the balance sheet to counter pressures in short-term financing markets.

Powell stressed the strength of the U.S. economy, but noted that it is vulnerable to shocks such as the global slowdown, trade concerns.

Finally, investors will also keep their eyes open on the minutes of the latest FOMC meeting to get clues about the future interest rate path after the Fed decided to cut the borrowing cost by another 25 basis points on September.

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