Dollar remains on defensive, U.S.-China trade talks awaited

Rising interest rates lift the opportunity cost of holding non-yielding metal while boosting the dollar, in which it is priced.

"He sees it as a slowdown in the economy and that of course is the whole point of it".

In the middle of worldwide trade disputes, Trump also accused China and Europe of manipulating their respective currencies and said that he does not expect much progress from trade talks with China this week in Washington.

Wilson also touches on BHP Billiton plc (LON:BLT), Housebuilder Persimmon PLC (LON:PSN) and Game Digital Plc (LON:GAME).

The dollar remained on the defensive on Wednesday, as U.S. President Donald Trump's comments on monetary policy continued to weigh on the greenback and as markets awaited U.S.

"Dealers are optimistic about the trade talks between the USA and China, despite the less cheery tone from Washington DC and Beijing", said market analyst David Madden at CMC Markets UK.

The Fed has raised rates twice this year and is expected to do so again next month.

Past presidents from both parties have sought to insulate the central bank from political pressure, anxious it could taint the Fed's decision-making and erode its credibility with the public. That has made the dollar stronger, making imports cheaper and exports more expensive - frustrating the president as he tries to win a global trade war.

Meanwhile, hedge funds and money managers increased their net short position in COMEX gold contracts for the sixth straight week to another record in the week to August 14, U.S. Commodity Futures Trading Commission data showed.

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Onshore Chinese yuan CNY=CFXS was a touch stronger at 6.844 per dollar and headed for its fifth straight session of gains. The Trump administration has raised tariffs on imports from a range of countries, including China and members of the European Union, triggering retaliatory tariffs on US exports. Trump has previously sent conflicting messages about Powell, saying that he was "not thrilled with Powell", while also calling Powell a "good man".

Gold is highly sensitive to rising United States interest rates as it increases the opportunity cost of holding non-yielding metal while boosting the dollar.

A Fed spokesman declined to comment on Trump's remarks on Monday.

"We're going to do our business in a way that's strictly non-political, without taking political issues into consideration, and that carries out the mandate Congress has given us", he said.

Despite criticism from the White House, economists give the Powell-led Fed very high marks.

"The Fed could be forced to act if incoming economic data showed the USA economy was hurting", said Sung Won Sohn, chief economist at SS Economics, an economic consulting firm. Fed Chairman Jerome Powell said a discussion on the operating framework of monetary policy would likely take place "in the fall", according to the minutes.

"Am I happy with my choice?" "I'll let you know in seven years".

Powell, a Republican, has repeatedly said that he believes in the Fed's independence and that he and his colleagues that set interest rates will not bow to outside pressure.

(Copyright © 2015. All Rights Reserved.)
 
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