CURRENCIES: Dollar Slips As Haven-related Buying Boosts Japanese Yen, Swiss Franc
16 October 2018 - 2:30AM
Dow Jones News
By Anneken Tappe
Sterling hovers in the red despite Theresa May's call for
calm
Geopolitical noise was the focus of foreign exchange investors
on Monday, leaving traditional havens like Japan's yen and
Switzerland's franc among the best performers, while the U.S.
dollar struggled.
The topics were plentiful. On the Brexit front, the Irish border
remains a sore point for the U.K. and the European Union
(http://www.marketwatch.com/story/brexit-talks-face-setback-just-days-ahead-of-key-summit-2018-10-14),
as they failed to find a compromise. Northern Ireland is part of
the U.K., while the Republic of Ireland is an EU member state,
leading to questions about how their border will be treated
post-Brexit. The next EU summit, which will have Brexit at its
center once again, is due to kick off on Wednesday.
"The pound opened below the psychological $1.31 handle on
concerns that a Brexit agreement might be slipping away after the
U.K. and EU negotiators were said to have called 'a pause' in their
Brexit talks and would now wait for the outcome of a summit midweek
before any resumption," said Dean Poppelwell, vice president of
market analysis at Oanda.
Sterling since edged higher, last buying $1.3143, up from
$1.3142 late Friday in New York.
"If there is insufficient progress [at the summit], the
possibility of a special summit next month to finalize an agreement
looks dead in the water. Dealers expect the pound to remain
volatile in the short-term," Poppelwell said.
U.K. Prime Minister Theresa May addressed her parliament on
Monday, called for "calm heads" and said the negotiations were now
in the final stages.
Elsewhere in Europe, Italy will submit its controversial budget
proposal to the European Commission on Monday. The proposal sees
Europe's fourth largest economy run a higher budget deficit to make
good on campaign promises of the ruling coalition, setting up a
clash with Brussels over EU fiscal rules.
German politics were also in focus after the Bavarian Christian
Social Union -- Chancellor Angela Merkel's sister party --
registered the worst result in decades in regional elections
(http://www.marketwatch.com/story/merkels-allies-fare-poorly-in-bavaria-regional-election-2018-10-14)
which also saw the far-right Alternative for Germany party win
enough votes to enter Bavaria's parliament. Merkel's coalition
government has faced much strain since the leader won a fourth term
last year, periodically causing concern about snap elections among
investors.
Nevertheless, the euro started the week in the green, rising to
$1.1583, compared with $1.1560 late Friday.
Meanwhile in the U.S., investors are digesting comments from
President Donald Trump
(http://www.marketwatch.com/story/from-climate-change-to-china-to-kavanaugh-heres-what-trump-told-60-minutes-2018-10-14)
who threatened "severe punishment" for Saudi Arabia, should any
connection between the country and a missing journalist be found.
Saudi Arabia responded with the threat of retaliation. In the same
60 Minutes interview, Trump also said a third round of import
tariffs for Chinese goods could come and that China wouldn't be
able to fight back.
Trump on Monday seemed to soften his stance on Saudi Arabia
after speaking with the country's ruler. Trump said it was possible
that "rogue killers" were behind the disappearance of the
journalist, Jamal Khashoggi.
The ICE U.S. Dollar Index was last down 0.2% at 95.069,
reversing Friday's gains
(http://www.marketwatch.com/story/dollars-3-day-slide-pauses-china-sets-yuan-level-at-weakest-in-18-months-2018-10-12).
The Swiss franc and Japanese yen were meanwhile benefiting from
the risk-off mood that reigned in the face of the political
headlines as well as weaker stocks in Europe and Asia. U.S. stocks
are also expected to open Monday's session lower.
One dollar last bought 0.9878 franc, down 0.5% near a two-week
low, while also fetching Yen111.80, down 0.4%, earlier hitting its
lowest in about a month.
(END) Dow Jones Newswires
October 15, 2018 11:15 ET (15:15 GMT)
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