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Forex markets: Global economy in focus

Currencies that secure ports such as the yen and Swiss francs were under pressure on Monday, as expectations of policy makers releasing new stimulus eased immediate concern for a declining global economy.

Such hopes found support from the Chinese central bank's interest rate reforms over the weekend, seen lower corporate costs for loans and reports of new fiscal stimulus in Germany.

However, investor optimism is likely to be cut short before a US decision later on Monday about whether they will continue to allow China's Huawei to buy supplies from US companies.

"Huawei is a great test to see if the current risk of mood will continue in the foreign exchange market," said Takuya Kanda, general manager of the research department at the Research Institute.

"There is a sense of calm right now because the stimulus story supports dollars against safe havens, but I'm not sure how long this calm will last."

The dollar index, which measures the greenback against six major currencies, was marginally higher in Asia at 98.1[ads1]92, near a two-week high of 98.339 reached on Friday.

Against the yen, the dollar was little changed at 106.44 yen, near a week high of 106.98 yen.

The Yen, which is usually bought as a safe haven in times of economic uncertainty, fell slightly on Monday versus the antipodean currencies.

The risk center may improve further if the US government offers some concessions to Huawei, making a resolution on the trade war more likely.

In May, the US government blacklisted Huawei and accused the world's largest manufacturer of spying and intellectual property telecommunications equipment. The allegations, which Huawei disputes, were a serious escalation in the US-China trade war.

The US Commerce Department is expected to extend a deferral granted to Huawei that will allow the Chinese company to purchase supplies from US companies so it can serve existing customers, two sources familiar with the situation told Reuters on Friday.

However, US President Donald Trump on Sunday said he did not want the US to do business with China's Huawei or national security reasons, and doubt the decision.

While a rejection for Huawei could easily have given fuel to a new effort of risk aversion, it appeared that risk-sensitive currencies had found some support for now.

The Australian dollar rose 0.2% to 72.21 yen, while the New Zealand dollar rose 0.1% to 68.36 yen

Gold, another active security area, fell 0.3% in the spot market to $ 509.30 per ounce.

People's Bank of China unveiled a key interest rate reform on Saturday to help lower corporate loan spending and support a receding economy that has been hurt by the US trade war.

Details of Chinese stimulus came after German media reported that the German government may be open to operating a fiscal deficit to boost growth.

China and Germany are two major global exporters that play a crucial role in world trade, so any steps to strengthen these two economies are positive for the global economic outlook.

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