By Saikat Chatterjee
LONDON (Reuters) - The dollar held near a one-month low against a basket of its rivals on Tuesday as a U.S.-Mexico trade deal aimed at overhauling the North American Free Trade Agreement boosted appetite for riskier assets.
However, market moves were largely limited as some sort of a deal was expected by foreign exchange traders in recent days, with both the Canadian dollar and the Mexican peso broadly flat against the greenback.
"The deal provides the impression that the U.S. President is less interested in causing a row at the moment but is making an effort to come home with constructive results from the theaters of trade war," said Esther Reichelt, an FX strategist at Commerzbank (DE:CBKG).
Against a basket of its rivals (DXY), the dollar hit its lowest level since Aug. 2 at 94.68 in early Asian trades before consolidating its losses.
Despite the dollar's struggles against its major rivals, the euro (EUR=EBS) was broadly steady around $1.1685 after Italy's Deputy Prime Minister Luigi Di Maio told an Italian paper the country's public deficit could exceed the European Union's ceiling of 3 percent of gross domestic product.
Among the major losers in the currency markets was sterling as London traders returned after a long weekend to more negative headlines on the Brexit front.
Against the euro (EURGBP=D3), sterling hit its weakest level in 2018 after the French Prime Minister Edouard Philippe asked his ministers to prepare contingency measures in case of a no-deal Brexit.
Shusuke Yamada, currency and equity strategist at Bank of America Merrill Lynch (NYSE:BAC) in Tokyo, said a de-escalation of trade tensions tended to be negative for the safe-haven yen, while supporting cross-yen trades.
"Cross-yen pairs like euro/yen ... have been a function of risk assets," Yamada said.
China's offshore yuan