The dollar held near a two-week low on Tuesday as growing concern over the trade conflict between the United States and China heightened the safe-haven appeal of the Japanese yen and the Swiss franc.
The United States on Monday announced criminal charges against China’s Huawei Technologies Co Ltd, escalating a fight with the world’s biggest telecommunications equipment maker, which denies wrongdoing. The announcement came days before trade talks with Beijing later this week.
The latest news sapped appetite for risk and ended a rally in Chinese stocks this month. The yen and the franc gained against the dollar.
Market participants are also focused on the Federal Reserve’s policy meeting on Jan. 29-30, where Chairman Jerome Powell is expected to acknowledge growing risks to the U.S. economy as global momentum weakens.
Investors expect the Fed to adopt a more cautious stance on policy than it did in 2018, pressured by signs of a peak in U.S. corporate earnings and the threat of a slowdown both at home and globally.
“Euro/dollar should be in a range for now given the trade talks and the Fed meeting this week,” said Kenneth Broux, a currency strategist at Societe Generale in London.
Also keeping the euro in a tight range are option expiries worth $6 billion between $1.14-1.15. Traders say any breach of those ranges would fuel volatility in the markets.
Sterling edged lower before crucial votes later in the day in the British parliament that are aimed at breaking the Brexit deadlock.
The British currency has rallied 6 percent from Jan. 4 lows, but further gains may be limited unless lawmakers emerge with a big majority on the votes.
In early London trading on Tuesday, sterling edged 0.1 percent lower to $1.3142 but remained near a 2 1/2-month high of $1.3218.
