The dollar stepped back from 13-1/2-month highs against other major currencies on Friday as talks next week between China and the United States offered some hope that the world’s two largest economies will find a way to head off a full-blown trade war.
The dollar index, a measure of the greenback’s strength against a basket of six major peers, was 0.1% lower at 96.549 .DXY.
It had climbed to 96.984, its highest since late June 2017 on Wednesday during a week in which a plunge by the Turkish lira and concerns over China’s economic health hit emerging market currencies, driving up demand for the safe-haven greenback.
The dollar lost steam, however, after China and the United States agreed on Thursday to hold a new round of trade talks on Aug. 21-22, helping stem risk aversion in the broader markets.
The euro, which had also been hit by fears of a spillover from Turkey’s financial crisis, was among the currencies to benefit from the news of trade talks. The euro was a shade firmer at US$1.1380, after gaining 0.3% overnight. The single currency was down 0.25% this week, having brushed a 13-month low of US$ 1.1301 in the wake of concerns that the Turkish crisis could hurt European banks.
The Turkish lira was little changed at 5.87 per dollar, and the closure of Turkish financial markets for a string of national holidays during Aug. 21-24 also provided some respite. The lira plunged to a record low of 7.24 on Monday before mounting a three-day rebound, helped by factors including measures by the Turkish central bank to support its currency and Qatar’s pledge to invest US$ 15 billion in Turkey.