Dollar advances to 1-year high; Chinese yuan weakens

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The dollar rose to a one-year high against a basket of currencies on Thursday, gaining for a third straight session, as investors further boosted long-term bets on the currency following bullish comments this week on the U.S. economy by Federal Reserve Chairman Jerome Powell.

The greenback also climbed to a one-year peak against the yuan, as trade worries and reports Beijing would boost liquidity in the financial system pressured the Chinese currency. The People's Bank of China is channeling credit to small and medium-sized firms as the country looks set to loosen monetary conditions to lessen the impact of a U.S.-China trade war.

Easier monetary policy tends to weaken a currency. The dollar index, a gauge of its value against a basket of six major currencies, was up 0.01 percent to 95.09, after touching a one-year high at 95.652.

The dollar was up as lower-than-expected jobless claims bolstered rate hike expectations after two days of upbeat comments on the U.S. economy by the Federal Reserve's chairman.

On Tuesday and Wednesday, Powell said in congressional testimony he believed the United States was on course for years more of steady growth, and he carefully played down the risks to the U.S. economy of an escalating trade conflict.

The widening interest rate gap between the United States and other major markets has lifted the dollar and prompted analysts to expect further strengthening.

"If you look at the U.S., we're just outpacing everyone in terms of rate hikes," said Minh Trang, senior FX trader, Silicon Valley Bank in Santa Clara, California. "That's going to help the dollar long term, and it has helped the dollar in the short term as well, obviously."

The dollar fell against the euro, with the single currency gaining 0.09 percent to $1.1644. Against the Japanese yen, the dollar fell 0.52 percent to 112.29 yen.

YUAN WEAKNESS

The Chinese yuan fell 0.8 percent to 6.7701 yuan per dollar in offshore trading.

China's Ministry of Commerce said on Wednesday it would have to take further measures to compensate for losses caused by U.S. tariffs on steel and aluminum U.S. President Donald Trump's top economic adviser, Larry Kudlow, said on Wednesday he believed Chinese President Xi Jinping has blocked progress on a trade deal. China called Kudlow's assertions "shocking" and "bogus" on Thursday.

So far this year, the yuan has weakened roughly 4.4 percent versus the U.S. dollar.