By Gina Lee
Investing.com – The dollar was down on Thursday morning, despite rising U.S.-China tensions after the U.S. State Department ordered the Chinese consulate in Houston to close within 72 hours on Wednesday.
The State Department said the consulate was being closed "to protect American intellectual property and Americans' private information."
China responded on Thursday by calling the move a political ploy ahead of the U.S. presidential elections in November and is reportedly closing the U.S. consulate in Wuhan in retaliation.
The market is still trying to ascertain whether this increase in geopolitical tension is going to be enough to derail the positive vibes we've been seeing," Rodrigo Catril, senior FX strategist at National Australia Bank (OTC:NABZY), told Reuters.
"Recent history will tell you that the market will tend to digest this stuff and carry on in its merry way...but a bit of caution is warranted, and the yuan moving higher is probably the canary in the coalmine that we need to keep an eye on."
The U.S. Dollar Index that tracks the greenback against a basket of other currencies slipped 0.08% to 94.852 by 13:10 AM ET (6:10 AM GMT).
The USD/JPY pair was up 0.02% to 107.17. Japanese markets are closed today for a holiday.
The USD/CNY pair gained 0.09% to 7.0048, with the CNY falling against the dollar over the rising tensions between the two countries.
"It seems escalation is inevitable in the near term," Commonwealth Bank of Australia (OTC:CMWAY) currency analyst Joe Capurso told Reuters.
"The upshot is China Offshore Spot [CNH] is likely to weaken further and broader currency volatility increase."
The AUD/USD pair was up 0.17% to 0.7150 and the NZD/USD jumped 0.26% to 0.6679.
The GBP/USD pair gained 0.07% to 1.2742.