The U.S. dollar on Monday rose against the Japanese yen, rebounding from a 16-month low against the typical safety play.
Analysts said recent trade-related fears seemed to be easing, but a broad dollar gauge remained under pressure.
What are currencies doing?
The ICE U.S. Dollar Index DXY, -0.17% — which measures the buck against six rivals — fell to 89.208, down from 89.495 late Friday in New York,
Yet the yen USDJPY, +0.43% lost ground against the greenback, with the dollar last buying ¥105.10, up from ¥104.73 late Friday in New York. The buck on Friday fell to its lowest level against the yen since the 2016 U.S. presidential election.
The euro EURUSD, +0.3804% traded at $1.2407, up from $1.2356 late Friday in New York, while the pound GBPUSD, +0.5307% changed hands at $1.4221, up from $1.4133 late Friday in New York.
What is driving the market?
Fears about a possible global trade war have weighed on the dollar in recent sessions, as President Donald Trump pushes for tariffs on at least $50 billion of Chinese goods.
But such concerns may be abating on Monday, thanks to reports that Washington and Beijing are talking behind the scenes to prevent a trade war. U.S. Treasury Secretary Steve Mnuchin said Sunday that he’s “cautiously hopeful” that the world’s two biggest economies will reach an agreement to avoid tariffs. American stock futures ESM8, +1.37% were trading sharply higher.
Opinion: Who gets hurt in a trade war? Mostly not China
And read: Apple’s Tim Cook, BlackRock execs urge Trump to support free trade
What are strategists saying?
Traders are seeing “a relief rally in risk on the first trading day of the week, with yen crosses rising across the board,” said Boris Schlossberg, managing director of foreign-exchange strategy at BK Asset Management, in a note. He was referring to other currencies gaining on the yen.
“After several intense days of risk aversion sparked by the announcements of trade tariffs last week, the markets were in much more upbeat mood as it became increasingly clear that Mr. Trump’s bark was much worse than his bite,” Schlossberg added.
The pound is “at the top of our watch list this week,” said Konstantinos Anthis, head of research at ADS Securities, in a note.
“Last week, the Bank of England communicated their intention to raise interest rates soon. This further supports the bullish outlook for the U.K. currency, and with the BOE expected to be the next central bank to hike rates, sterling may enjoy further gains.”
See: Brace for 2 rate hikes from the Bank of England in 2018, analyst says