By Tommy Wilkes
LONDON (Reuters) – Euro rally and risky currencies as the Australian dollar strengthened on Monday as optimism over a breakthrough in the US and China Trade war talks encouraged investors.
The euro has been stuck in a trading area against the dollar for several months as rising weakness in the euro area economy counteracted dwindling expectations. The Federal Reserve will raise US interest rates again this year.
But having gone down to a three-month low on Friday, the euro has recovered, helped by improved investor sentiment, as hopes rose for an end to the US-China trade conflict after both parties reported progress in talks.
The dollar, the world's most liquid currency, tends to work well during the investor's nervousness.
"Usually, the mood is still quite positive on the prospects of trading," said Adam Cole, a currency analysis t at RBC Capital Markets, adding that he believed the "risk-on" mood would continue.
"If anything we wanted to run with it. You have a pretty decent background and a Fed waiting for prices."
However, he said a better way to play Fed's break on interest rate hikes was in the dollar / yen, as several Japanese investors chose not to hedge dollar-denominated asset purchases that already earn a decent return after the 201
Cole sees the dollar / yen rise to 120 yen per dollar by the end of 2019 from its current level of 110.55.
Euro picked up 0.3 percent higher to $ 1,1328, while the one that measures the US unit against a basket of rivals went down 0.2 percent to 96.687 in a quiet rise with US markets closed for a Monday vacation .
Despite Monday's gains, dealers are betting on a weaker euro in the coming months. They expect the European Central Bank to maintain its simple monetary policy against the backdrop of slow growth, weak inflation and political uncertainty.
The Commerzbank (DE) analysts said that the only currency also remains vulnerable to any flare in a US-European trade conflict.
"There would be very little reporting on the positive side of the euro if this conflict were to escalate. The least economic disturbances will undoubtedly be detrimental to the euro in light of the vulnerable state of the eurozone economy," they wrote.
The Australian dollar, considered a global risk sentiment barometer, rose 0.2 percent to $ 0.7154.
Sterling achieved 0.3 percent to $ 1,2918, up from last week's quarters, while investors waited for the outcome of talks between the UK and the EU, with London trying to convince Brussels to adjust its recall agreement.
Emerging Market currencies were mixed.
Fusion Media or anyone involved in Fusion Media will not be liable for any loss or damage resulting therefrom. of trust in the information, including data, quotes, charts and buy / sell signals found on this website. Be well informed about the risks and costs of trading with the financial markets, which is one of the most risky forms of investment.