By Tom Westbrook
SINGAPORE (Reuters) – The dollar clung to a small bounce on Wednesday, as investors took a breather from weeks of fairly fierce selling and markets stabilised to wait for progress on U.S. trade talks.
Chinese first quarter GDP data and a batch of March economic indicators are due later in the session, though they will be backward-looking and U.S. Federal Reserve Chairman Jerome Powell is scheduled to speak. The Bank of Canada meets later on Wednesday with a rate cut priced at about a 40% chance.
The local dollar, firm at C$1.3948 per greenback and up 4% in April is one of starkest examples of how heavily investors have punished the dollar as trade policy has rattled confidence.
The euro, which reached three-year highs last week, has eased from a peak of $1.1474 to trade at $1.1311 in the Asia morning. It is up more than 4.5% this month and was overdue a pullback and there has also been little sign of substantive progress toward any deal to avoid heavy U.S. tariffs.
Sterling, however, stood out and notched a six-month high at $1.3254. Britain had been spared the most punitive U.S. levies and overnight U.S. Vice President JD Vance said there was a good chance a trade deal could be struck.
“The President really loves the United Kingdom,” he said. “He loved the Queen. He admires and loves the King.”
British CPI data is due later in the day.
The yen was steady at 142.85 per dollar. The U.S. dollar index, which poked above 100 overnight, hovered just shy of that level at 99.899 in early Asia trade.
The Swiss franc, the largest gainer amongst G10 currencies since Donald Trump’s “Liberation Day” tariff announcement, was firmer on Wednesday morning at 0.8184 per dollar.
The Australian and New Zealand dollars, which last week notched their largest weekly rises since 2020, were a little off recent highs with the Aussie at $0.6334 and the kiwi at $0.5896.
China’s first-quarter data, Powell’s appearance and other economic releases due on Wednesday will garner traders attention but the focus for the broad direction of currencies and especially the dollar is on the bond market and the yuan.
China has weakened the trading band of the yuan only slightly since the onslaught of tariffs that have topped 100% and on Tuesday had actually steadied the currency. Any sort of sharp cuts to its value would be a broad tailwind for the dollar.
The U.S. Treasury market – the focus of near-panic selling last week – has shown signs of steadying and is being watched for signs that a fairly tight correlation between yields and the dollar could resume after a dislocation.
“We think the restoration of the higher UST yield = stronger USD equation would be a major sign of normalisation,” said Standard Chartered’s head of G10 FX research, Steve Englander.
“We think the unwinding of growth pessimism, along with reduced prominence for tariff policy, could lead to renewed USD support.”
(Reporting by Tom Westbrook.; Editing by Shri Navaratnam)
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