(Reuters) - Trade-oriented currencies including the Australian dollar surged on Tuesday, with the Chinese currency poised for its biggest daily jump in nearly three months on increasing signs that Beijing and Washington are inching closer to a trade deal.
A decision by the Chinese central bank to trim lending rates by only 5 basis points also boosted general risk appetite, with the perceived safe-haven Japanese yen and the Swiss franc weakening by a third of a percentage point.
China is pushing U.S. President Donald Trump to remove more tariffs imposed in September as part of a “phase one” U.S.-China trade deal, which is expected to be signed later this month, people familiar with the negotiations said.
“(The market thinks) we are clearly very close to achieving phase one of the trade deal and therefore the anticipation is that growth in China might improve, and therefore we might see improvement in the renminbi,” said Jane Foley, a senior FX strategist at Rabobank.
The yuan traded in the offshore market jumped as much as 0.7% to its strongest since Aug. 5 at 6.9867 CNH=D3. The onshore yuan also posted its strongest close since Aug. 2. CNY=CFXS.
The currency held its gains even after China’s central bank cut its one-year medium-term lending facility (MLF) rate for the first time since early 2016, though it opted for a 5 bps cut that Commerzbank called “tiny”.
“It’s a very small move but it does beg the question of whether or not the PBoC are going to be easing interest rates again,” said Foley.
