SYDNEY: The dollar eased broadly against riskier currencies and the yuan scaled a five-month high on Tuesday, as talks between US and Chinese leaders seemed to have an amicable start, while traders awaited looming US retail sales data.
The euro also scraped off a 16-month low and rose almost 0.2% to $1.1383 as it licks wounds from a drubbing on Monday amid concerns about COVID-19 outbreaks and pushback on rate hike expectations from Europe's central bank chief.
Calling US President Joe Biden an "old friend," his Chinese counterpart Xi Jinping said their countries must increase communication and cooperation. Both leaders stressed their responsibility to avoid conflict in opening remarks.
By the halfway point in talks, the yuan had climbed to its highest since June in onshore trade at 6.3666 per dollar. The risk-sensitive Australian and New Zealand dollars also rose about 0.2% each while the safe haven yen eased a fraction.
"Xi called Biden "my old friend" and said that the two countries should work together," said Qi Gao, Asia FX strategist at Scotiabank. "Therefore, the situation after the meeting should be better," he said, helping the yuan and other currencies which are sensitive to the tone of US-China ties.
The Aussie also shrugged off more jawboning from central bank head Philip Lowe who in a speech again pushed back on market pricing for hikes as soon as 2022, arguing inflation was likely to lag well behind spikes seen elsewhere.
The Aussie traded just above its 50-day moving average at $0.7368. Swaps markets are still priced for 100 basis points of hikes by early 2023.
The kiwi, which is awaiting a central bank meeting in New Zealand next week, edged up to $0.7060 with the broadly positive mood in Asia.
The yen fell slightly against the euro and the dollar, last trading at 114.16 yen per dollar and 129.95 yen per euro.
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