Dollar inches higher as markets cautious on U.S.-China meeting

Philippe Huguen | AFP | Getty Images

The dollar was slightly higher on Thursday as investors were hesitant to make big bets ahead of a two-day summit between U.S. President Donald Trump and his Chinese counterpart Xi Jinping, a meeting that could have geopolitical ramifications.

"The market's main concern is that Trump and Xi don't see eye-to-eye on most things and that traders infer this from the body language and lack of clear language coming out of the meeting and subsequent press conferences," said Thierry Albert Wizman, global interest rates and currencies strategist, at Macquarie Group in New York.

ECB’s Draghi: Reassessment isn’t warranted at this stage

"Rather than a lack of agreement, however, the greater risk is a lack of deep engagement," he added.

Trump faces pressure to deliver trade concessions with China for some of his most fervent supporters and prevent a crisis with North Korea from spiraling out of control. However, White
House officials have set low expectations for the meeting.

The latest U.S. Federal Reserve minutes, released on Wednesday, added to investor caution on the dollar, since they didn't really change the view of a slow pace of U.S. interest rate rises this year, said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

In midday trading, the dollar index was up 0.11 percent at 100.67. The greenback also rose 0.23 percent versus the yen at 110.94.

The euro, meanwhile, was slightly negative at $1.0655, erasing losses which took it to a three-week low following European Central Bank President Mario Draghi's comments saying he saw no need for now to deviate from the ECB's policy path

Before altering its stance, the ECB must have sufficient confidence that inflation would return to target over a medium-term horizon, he said.

Pullback in the dollar?

The single currency had jumped above $1.09 in March for the first time since early November after Draghi signaled a diminishing urgency for expansionary policy, with investors pricing a possible rate hike in early 2018.

"Draghi made it very clear that he's not intending any change in the forward guidance, that policy still needs to remain expansionary for a very long time," said Commerzbank currency strategist Esther Reichelt, in Frankfurt.