US Dollar strengthened on Tuesday amidst U.S.-China trade-war concerns

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May 14, 2019 5:35pm NYSE:UUP

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From Aaron Hankin: The U.S. dollar strengthened Tuesday, attempting to snap a 4-day losing streak against its key rivals, amid a contentious dispute between the U.S. and China over trade.

The ICE U.S. Dollar Index, DXY, +0.18% a measure of the greenback’s strength versus six trading rivals, was up 0.2% at 97.506.

What are analysts saying?

“Judging by the moves in other G-10 currencies, it looks as if the main reason for the higher open and intraday gain in the index has been a weaker [Japanese yen],” said Stephen Gallo, head of FX strategy at BMO Capital Markets. “But overall, [emerging-market] currencies have faced less pressure to depreciate thus far today, and this has put a lid” on broad dollar strength.

The Japanese yen USDJPY, +0.01%  fell to ¥109.65, compared with ¥109.30 late Monday.

The fall in the yen came as investors cautiously dipped back into U.S. equities.

Late Monday President Donald Trump said details of the trade relationship would be clear in the coming weeks, adding, “I have a feeling it’s going to be very successful.”

Euro steady after weak ZEW

German business confidence fell in May with a popular index slipping into negative territory. The ZEW economic sentiment indicator fell to -2.1, down from 3.1 in April.

“EURUSD saw some muted downward pressure as the ZEW economic sentiment figures revealed a negative outlook on the future growth of Germany and the eurozone amid the recent escalation in trade wars between the U.S. and China,” wrote Daniela Sabin Hathorn, analyst at Daily FX.

“Consequently, this has halted the recent upside in the pair, which had been supported from the depreciation in the dollar following the latest trade war developments.”

The euro EURUSD, +0.0268%  was marginally lower at $1.1208.

Meanwhile, the British pound GBPUSD, +0.0310%  fell to $1.2905 compared with $1.2957.

On the calendar

On the economic data front, the National Federation of Independent Business said its small-business optimism index rose 1.7 points to 103.5, its highest level in four months. And higher oil prices saw the cost of goods imported to the U.S. rise 0.2% in April, according to the Bureau of Labor Statistics.

The Invesco DB US Dollar Index Bullish Fund (UUP) was unchanged in after-hours trading Tuesday. Year-to-date, UUP has gained 9.07%, versus a 6.62% rise in the benchmark S&P 500 index during the same period.

UUP currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 16 ETFs in the Currency ETFs category.

This article is brought to you courtesy of MarketWatch.

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