WASHINGTON (dpa-AFX) - It was a pretty strong outing for the U.S. dollar on Monday as the United States and China agreed to resume trade negotiations and to hold off on further tariffs against each other's products.
The decision was taken by the two countries after the meeting between U.S. President Donald Trump and Chinese President Xi Jinping on the sidelines of the G20 summit in Japan on Saturday.
Following the decision to call truce, the Unites States agreed to put off additional tariffs on Chinese goods indefinitely while removing some curbs on Huawei Technologies Co. buying high-tech equipment from the U.S.
In response, China agreed to make unspecified new purchases of U.S. farm products and return to the negotiating table.
Trump told reporters that his meeting with Xi was 'excellent, as good as it was going to be' and 'we're right back on track.' He revealed that he will not follow through on threats to raise tariffs on all remaining Chinese imports 'at least for the time being.'
Trump noted that existing tariffs on Chinese imports will remain in place, suggesting the U.S.-China trade dispute could still act as headwind to the global economy unless the conflict is eventually resolved.
'The quality of the transaction is far more important to me than speed,' Trump said in a post on Twitter. 'I am in no hurry, but things look very good!'
Although the two countries have still a long way to go to get anywhere close to finalising a trade deal, the fact that they will now resume negotiations proved a strong enough trigger for investors to seek riskier assets, shunning safe havens such as gold and the Japanese yen.
The dollar index rose to 96.87, a two-week high, gaining nearly 0.8% over previous close.
Against the European currency, the dollar gained more than 0.75%, as it strengthened to $1.1282 a unit of euro.
Weak eurozone economic data contributed as well to the euro's decline against the greenback.
Eurozone manufacturing activity contracted for the fifth straight month in June, final data from IHS Markit showed. The latest pace of decline was slightly more than initially estimated.
The factory Purchasing Managers' Index fell to a 3-month low of 47.6 in June from 47.7 in May. The score was slightly weaker than the earlier flash reading of 47.8.
Against British Pound Sterling, the dollar advanced to 1.2637, gaining nearly 0.5%.
The U.K. manufacturing sector shrank at the fastest pace in over six years in June, as factories reduced production due to weaker demand leading to an erosion of business confidence, results of a survey showed.
The seasonally adjusted IHS Markit/CIPS Purchasing Managers' Index, or PMI, dropped to 48 from 49.4 in May. Economists had expected the reading to improve modestly to 49.5.
UK financial services sector sentiment continued to weaken in the second quarter, the financial services survey from the Confederation of British Industry/ PricewaterhouseCoopers showed.
The Japanese yen weakened to 108.53 a dollar, and was last seen hovering around 108.45, down 0.5% from previous close.
The dollar was up as much as 1.15% against Swiss franc with the USD-CHF pair trading at 0.9875. Disappointing retail sales and manufacturing data out of Switzerland weighed significantly on the Swiss currency.
Against the loonie, the dollar was up 0.3% at 1.3134 and against the Aussie, it was gaining about 0.8% at 0.6964.
In economic news today, a report from the Institute for Supply Management showed a modest slowdown in the pace of growth in U.S. manufacturing activity in the month of June.
The ISM said its purchasing managers index edged down to the lowest level since October 2016, falling to 51.7 in June after slipping to 52.1 in May. Economists had expected the index to dip to 51.0.
Meanwhile, a report from the Commerce Department said construction spending slid by 0.8% to an annual rate of $1.294 trillion in May after climbing by a revised 0.4% to a rate of $1.304 trillion in April.
Economists had expected construction spending to remain roughly flat after the data originally reported for the previous month showed spending was virtually unchanged.
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