July 3, 2018 / 3:02 PM / 4 months ago

FOREX-Dollar weakens as risk appetite improves ahead of U.S. holiday

    * Chinese central bank to keep yuan stable
    * Currency markets relieved with Australian dollar leading
gains
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Recasts, updates prices, adds comments, changes byline,
dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 3 (Reuters) - The dollar fell on Tuesday as
investors consolidated recent gains and focused less on trade
tensions, raising the market's risk appetite and prompting some
flows into other currencies such as the euro and Australian
dollar.
    Ahead of the U.S. Independence Day holiday, market sentiment
also improved after the Chinese central bank moved to calm
nervous foreign exchange markets following a fall in the
renminbi below a key psychological level.
    In a statement on the website of the People's Bank of China,
Governor Yi Gang said the central bank was closely watching
fluctuations in the foreign exchange market and would seek to
keep the yuan at a stable and reasonable level.
    "That sentiment may have helped risk appetite a little...but
the U.S. July 4th holiday and the July 6th start of U.S.-China
trade tariffs are serving to keeping FX investors on the
sidelines for now," Shaun Osborne, chief FX strategist at
Scotiabank in Toronto, said.  
    In China, protracted weakness of its currency raises the
prospects of capital outflows and a slowdown in the world's
second-biggest economy, creating a new source of concern for
currency markets grappling with rising threats to global trade. 
  
    The central bank's comments snapped a 10-day losing streak
in the value of the renminbi which has seen it lose nearly 4
percent against a trade-weighted basket and nearly 4.5
percent against the dollar over that period. 
    The yuan fell to 6.7204 per dollar, its weakest since Aug.
7, 2017, before recovering to trade at 6.6466 per dollar.
    In mid-morning trading, the dollar was down 0.4 percent
against a basket of rival currencies at 94.649, after
notching up three consecutive months of gains. Investors are
awaiting the release of the Federal Reserve's June meeting
minutes and jobs data for validation of policymakers' forecasts
for two more rate hikes this year.
    The Fed will release minutes of its June meeting on Thursday
and investors will parse the data and the statements to gauge
whether it is still on track to raise interest rates twice more
this year. Monthly payrolls data follow on Friday.
    Valuations also remain supportive of the dollar, with its 
trade-weighted basket still below long-term averages.
    The euro, meanwhile, was supported after Germany's coalition
settled a row over migration that had threatened to topple
Chancellor Angela Merkel's government. The single currency was
0.1 percent higher at $1.1652.
    The Australian dollar, sensitive to developments in
China because it is a key buyer of Australian commodity exports,
extended gains and rose 0.7 percent on the day to US$0.7387.
    ========================================================
    Currency bid prices at 10:22AM (1422 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1657        $1.1639     +0.15%         -2.83%      +1.1673     +1.1621
 Dollar/Yen       JPY=        110.6200       110.8900    -0.24%         -1.82%      +111.1300   +110.6000
 Euro/Yen         EURJPY=     128.98         129.06      -0.06%         -4.59%      +129.5500   +128.7600
 Dollar/Swiss     CHF=        0.9922         0.9934      -0.12%         +1.84%      +0.9950     +0.9914
 Sterling/Dollar  GBP=        1.3171         1.3141      +0.23%         +0.00%      +1.3206     +1.3115
 Dollar/Canadian  CAD=        1.3156         1.3184      -0.21%         +4.60%      +1.3207     +1.3132
 Australian/Doll  AUD=        0.7387         0.7339      +0.65%         -5.31%      +0.7404     +0.7315
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1567         1.1562      +0.04%         +0.00%      +1.1585     +1.1559
 Euro/Sterling    EURGBP=     0.8849         0.8855      -0.07%         +0.00%      +0.8863     +0.8829
 NZ               NZD=        0.6736         0.6714      +0.33%         +0.00%      +0.6752     +0.6689
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.1299         8.1700      -0.49%         -0.94%      +8.1809     +8.1105
 Euro/Norway      EURNOK=     9.4775         9.5105      -0.35%         -3.77%      +9.5183     +9.4598
 Dollar/Sweden    SEK=        8.8435         8.9640      -1.19%         +7.83%      +8.9795     +8.8346
 Euro/Sweden      EURSEK=     10.3097        10.4340     -1.19%         +4.78%      +10.4420    +10.3037
 
    
 (Reporting by Gertrude Chavez-Dreyfus and Saikat Chatterjee;
Editing by Jane Merriman and Andrea Ricci)
  
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