The US dollar fell to a two-week low against its major peers on Wednesday, despite Chinese President Xi Jinping’s pledge to lessen import tariffs, which has helped ease trade tensions between the US and China.
The dollar index against a basket of six major currencies declined 0.09 percent to $89.24, its lowest level since March 28.
The greenback weakened against the safe-haven yen by 0.3 percent to 106.82, while it recovered against the Swiss franc by 0.07 percent to 0.9576. The currency was also down by 0.1 percent to 6.2771 against the yuan.
The Canadian dollar was up by 0.1 percent to 1.2618 per US dollar, after hitting a seven-week high of 1.2588 on Tuesday, due to higher oil prices and softening trade dispute between the US and China.
The dollar may take its cues from the US March core consumer price index (CPI) that is due later in the day, and the minutes of the Federal Reserve’s March meeting.
Economists expect the CPI to remain steady at 0.2 percent, while core year-on-year CPI is projected to increase from February’s 1.8 percent to 2.1 percent.
Xi’s Pledge Raises Hopes of Avoiding a Trade War
After weeks of hitting reciprocal trade tariffs on each other, President Xi has promised on Tuesday to cut vehicle import tariffs this year and open China’s economy further, in an effort to resolve its trade spat with the US.
Aside from cutting import tariffs, the Chinese government also plans to loosen restrictions on foreign ownership in its auto industry and strengthen intellectual property rights enforcement.
Xi said cold war mentality as well as a zero-sum game has become increasingly outdated, and that isolationism will only hit walls.
The statement came after the Trump administration revealed last week its plans to implement tariffs on 1,300 Chinese products worth about $50 billion a year in imports to the US. The charges served as penalty for China’s alleged intellectual property theft.
Chinese companies were believed to be stealing trade secrets of American corporations as well as compelling them to hand over technology in exchange for gaining entry to the country’s market.
Xi’s comments resulted to an improvement in risk sentiment, which was followed by a rally of more than 3 percent in global equities and oil prices, but became a disadvantage for the dollar, as his comments alleviated concerns about a trade war that could potentially harm global economic development.
US President Donald Trump commended the actions of his Chinese counterpart, saying that he appreciates Xi’s plans on tariffs and access for US automakers, as well as his enlightenment on the matter of intellectual property, adding that they will make great progress together.
The recent remarks from both leaders seemed to have raised further the odds of preventing a full-blown trade war from happening, even though Trump and Xi have not been able to talk since the US tariffs were announced.
Economists said the focus is now on the possible US response and that they will watch closely on the progress of those opening-up measures.
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