Dollar rises with a US-Mexico trade deal
The dollar remained close to a one-month low against the euro on Tuesday, but rose against the yen after the US-Mexico agreement aimed at reforming the North American Free Trade Agreement boosted appetite for high-risk assets.
The deal has forced Canada to agree to new conditions to maintain a three-nation pact, which could revive economic uncertainty triggered by repeated threats by US President Donald Trump to abandon the 1994 agreement.
However, Ayako Serra, a market strategist in Tokyo at Sumitomo Mitsui Trust Bank, said the US-Mexico deal has reduced concerns about the escalation of international trade tensions at the moment.
“It’s not that the trade problems between Mexico and the United States have been fully resolved,” Serra said, “moving forward, Canada will participate, so there are still parts that are difficult to predict.”
Meanwhile, the Mexican peso closed 0.8% higher on Monday after initially rising 1.2% after the trade deal was announced.
The USDJPY rose 0.1% to 6.8225, while the RMB traded around 0.1% at 6.8015 against the USD. It was not far from 6.7818, its highest level since July 31, as it touched on Monday after the People’s Bank of China revived the “anti-cyclical factor” in the daily fixation over the weekend to support the currency. The People’s Bank of China raised its official midpoint of the yuan to 6.8050 against the dollar on Tuesday, 0.7% more stable than the previous correction level of 6.8505 and market expectations to a large extent.