Investing.com - The U.S. dollar fell on Thursday as safe-haven demand for the currency diminished with promising NAFTA negotiations easing global trade tensions.
The U.S. Dollar Index, tracking the greenback against a basket of six currencies, dropped 0.03% to 94.57 by 1:45AM ET (05:45 GMT). The index picked up slightly from a four-week low of 94.434 on Tuesday.
The greenback, widely considered as a safe-haven asset in recent months, has been on the defensive this week in the wake of improving risk sentiment in broader markets, as Canada rejoined the NAFTA negotiations on Thursday after U.S. and Mexico announced a bilateral trade deal earlier this week.
Foreign Minister Chrystia Freeland said the talks with the U.S. were at a “very intense moment” and that she is looking for compromises that were “win-win” for both sides, while U.S. President Donald Trump said he believed Canada “very much want to make the deal.”
The pound's rally after the European Union revived hopes of a Brexit deal was also cited as headwind for the dollar.
Meanwhile, the U.S. reported on Wednesday the strongest second-quarter growth in nearly four years, with the economy expanding at an annual rate of 4.2%..
Markets now widely expect the Federal Reserve to hike interest rates in September and December following last week’s Jackson Hole symposium, where Fed’s chairman Jerome Powell defended policy of interest rate hikes, adding that he expected a low but gradual growth of interest rates as inflation is reaching the country’s 2% objective.
The USD/CNY pair gained 0.2% to 6.8386 while the USD/CNH pair rose 0.3%. Trading volume data on the FX trading platform of CBOE Global Markets showed average daily volume in dollar-offshore yuan jumped to a record $1.7 billion in July, from $421 million a year earlier. On the other hand, EBS Market, NEX Group Plc’s FX trading system, also saw a new high in offshore yuan transactions last month, exceeding the previous peak by 17%.
Elsewhere, the AUD/USD pair dropped 0.4%, while the NZD/USD pair fell 0.9% after data showed weak business confidence for August.
The USD/JPY pair slipped 0.05% to 111.65 on Thursday.