Markets News

FOREX-Dollar falls to 3-month low on hopes of Brexit, U.S.-China trade deals

    * Euro up vs dollar as risk appetite returns
    * Sterling rises to 3-month high vs dollar
    * Safe-haven yen drops to 2-1/2-month low vs dollar
    * EU, Britain to hold intense negotiations on Brexit deal 
    * China drums up hope for a partial trade deal 
    * Graphic: World FX rates in 2019

 (Adds new comment, Fed announcement on T-bill purchases, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 11 (Reuters) - The dollar dropped to a three-month low on Friday as safe-haven buying
eased and risk sentiment improved on hopes of progress in trade negotiations between the United States and
China, as well as increased chances of an orderly British exit from the European Union.
    Sterling rose to a more than three-month high versus the dollar on optimism about Brexit, while the
euro advanced to a three-week peak as risk appetite rose.
    At the same time, other safe-haven currencies such as the yen and Swiss franc slid on the day.
    "The risk premium on the dollar, some of the froth around that, seems to be coming off with some
progress on U.S.-China trade talks, maybe, and some progress, maybe, on Brexit," said Shaun Osborne, chief
FX strategist at Scotiabank in Toronto. 
    President Donald Trump and other U.S. officials on Friday signalled good news was coming in trade
talks with China, while Beijing indicated it was open to a "partial" deal that would avoid a planned hike
in tariffs on its goods.
    Officials, including U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, ended a
second day of talks in Washington on Friday. Trump and Liu are scheduled to meet later on Friday.
    On Brexit, the EU agreed on Friday to hold another round of intense negotiations with London in a bid
to secure a deal.
    EU negotiator Michel Barnier and his British counterpart Stephen Barclay earlier held what both sides
called a "constructive" meeting in Brussels as Britain's scheduled departure date of Oct. 31 nears. The
British and Irish prime ministers said on Thursday they had found "a pathway" to a possible deal, and by
Friday some officials were expressing guarded optimism.
    Erik Bregar, head of FX strategy at Exchange Bank of Canada in Toronto, said sterling risk reversals,
an indicator of currency sentiment in the options market, are exploding higher into positive territory,
with calls now trading at a big premium to puts. The move suggested that option traders are betting
sterling has turned the corner against the dollar, he said.
    In the United States, the Federal Reserve announced on Friday it will start buying about $60 billion
per month in Treasury bills to ensure "ample reserves" in the banking system. It emphasized though that
the new program does not mark a change in monetary policy.
    "This allays some of the funding concerns," said Scotiabank's Osborne. "It's not dollar-negative
because it removes some of the upside risks of the squeeze on funding that we saw at month- and
quarter-end," he added.
    In afternoon trading, the dollar index was down 0.4% at 98.307, after earlier declining to a
3-1/2-month low of 98.197.
    The euro, meanwhile, rose 0.3% to $1.1040, mirroring the three-week high reached on Thursday.
    The safe-haven yen weakened against the dollar, which gained 0.5% to 108.50 yen. The dollar
earlier touched a 2-1/2-month high against the yen.
    Sterling surged to a more than three-month high of $1.2708 and a five-month peak of 87.02
pence against the euro. The pound was last up 1.7% at $1.2662.
    Currency bid prices at 3:01PM (1901 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1038        $1.1004     +0.31%         -3.76%      +1.1062     +1.1002
 Dollar/Yen       JPY=        108.5000       107.9600    +0.50%         -1.60%      +108.6100   +107.8600
 Euro/Yen         EURJPY=     119.80         118.80      +0.84%         -5.09%      +119.9900   +118.7400
 Dollar/Swiss     CHF=        0.9975         0.9969      +0.06%         +1.64%      +0.9990     +0.9959
 Sterling/Dollar  GBP=        1.2658         1.2440      +1.75%         -0.78%      +1.2705     +1.2409
 Dollar/Canadian  CAD=        1.3186         1.3290      -0.78%         -3.31%      +1.3300     +1.3170
 Australian/Doll  AUD=        0.6798         0.6761      +0.55%         -3.56%      +0.6810     +0.6754
 Euro/Swiss       EURCHF=     1.1013         1.0970      +0.39%         -2.14%      +1.1039     +1.0966
 Euro/Sterling    EURGBP=     0.8719         0.8845      -1.42%         -2.95%      +0.8868     +0.8696
 NZ               NZD=        0.6335         0.6318      +0.27%         -5.69%      +0.6353     +0.6317
 Dollar/Norway    NOK=        9.0706         9.1238      -0.58%         +5.00%      +9.1290     +9.0509
 Euro/Norway      EURNOK=     10.0130        10.0430     -0.30%         +1.07%      +10.0510    +10.0015
 Dollar/Sweden    SEK=        9.8018         9.8403      -0.07%         +9.35%      +9.8465     +9.7863
 Euro/Sweden      EURSEK=     10.8227        10.8301     -0.07%         +5.44%      +10.8546    +10.8090
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Kirsten Donovan and Sonya Hepinstall)