Dollar strengthens as relief over U.S.-Mexico trade deal dissipates

London (Aug 29)  The dollar rose on Wednesday as relief about a U.S.-Mexico trade deal gave way to concern among investors that the conflict over trade between the U.S. and China was not about to end soon.

The U.S currency had dipped to a four-week low overnight as investors unwound safe-haven bets on the currency after the United States and Mexico agreed on Monday to overhaul NAFTA.

The U.S. currency has fallen for three consecutive weeks, even though the United States was raising interest rates faster than other major economies.

That is partly because of political uncertainty in the U.S. - criminal convictions were brought against of one of President Donald Trump's ex-advisors last week - and comments by the Federal Reserve that seemed to suggest a slower pace of U.S.
 rate increases.

On Wednesday, though, the dollar index gained and at 1045 GMT was up 0.1 percent at 94.826 . It traded as low as 94.434 during the previous session, its lowest since July 31.

"This deal [with Mexico] was more about making progress before the mid-term elections in the United States," said MUFG currency strategist Lee Hardman.

"The real fight is likely still ahead and it will not be long before investor attention shifts back to the more concerning conflict with China," he added.

The deadline for public comment on U.S. President Donald Trump's tariffs on another $200 billion of Chinese goods is on Sept. 5, with the new measures possibly taking effect later that month .

Elsewhere, the Swedish crown edged down towards a nine-year low versus the euro of 10.721 hit on Tuesday over uncertainty about next week's election and signals that interest rates won't rise until 2019.

Reuters