* Sino-US trade calls pass smoothly, Asia FX bought
* Powell speech is seen as crucial in the next move of the dollar
* German IFO eye nervous after soft PMI data
* Graphics: World exchange rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, Aug. 25 (Reuters) – The dollar slipped Tuesday, and Asia’s trade-exposed currencies rose after the United States and China both hailed a phone call between their top trading officials as a success.
This reaffirmed investors’ belief that even if diplomatic ties between the two countries violate, the trade relationship can endure. The news lifted the Australian dollar 0.2% to $ 0.7172 and pushed the Chinese yuan firmer to 6.9007.
Emotions and support for more risky currencies over the dollar were also bolstered by a report by the Financial Times, which said U.S. authorities were considering rapid-tracking approval of a COVID-19 vaccine developed by AstraZeneca and Oxford University.
Movements were contained as markets did not expect a split in the trade deal and looked forward to a speech by Federal Reserve Chairman Jerome Powell later this week which could move the US dollar in both directions.
The broad pressure on the dollar helped the euro back above $ 1.18 by mid-morning in Asia, and the pound rose 0.3% to $ 1.3102. Weighed down by expectations of negative future prices, it fought for a gain of $ 0.6528.
“It is reassuring that, despite all the rhetoric, the United States and China clearly still want to have an economic relationship,” said National Australia Bank senior currency strategist Rodrigo Catril. “It enhances the feelgood vibes.”
On the call originally scheduled for August. 15, US Trade Representative Robert Lighthizer and Finance Minister Steven Mnuchin spoke with Chinese Deputy Prime Minister Liu He.
The United States said both sides “see progress” and the Chinese Ministry of Commerce called the talks “constructive”.
The yen in safe harbor was stable at 105.95 per. Dollar.
Elsewhere, the trade-sensitive South Korean rose with the mood, while the Indian rupee picked up where it left off after 1% on Monday as the central bank unexpectedly broke with a recent pattern of dollar purchases.
The training in the Asia session returns a mild pressure on the greenback, who had stopped trading with New York and defied a positive mood in the stock market – which often drives dollar sales in favor or more risky currencies.
Against a basket of currencies, the dollar dipped 0.1% to 93,180, and it sits at a crossroads: Flat for the month after an approx. 10% slippage from late March to early August.
Its short-term fate depends on whether Europe’s economy maintains the impression that it surpasses the United States and on what the market thinks the Fed will do next.
At the moment, all eyes are on Powell’s address for a virtual Jackson Hole symposium on Thursday, where investors expect him to sound stupid and perhaps speak to speculation that the central bank could take a more accommodating stance on inflation.
“If we do not get dovishness, I expect you will actually cause interest rates to rise and pop higher in the US dollar,” said Westpac FX analyst Imre Speizer.
“I think what we see now is any excuse to buy back (the dollar) as the players who have been short all the way down get quite nervous and take the money off the table.”
Investors are also looking forward to Germany’s IFO Business Climate Index, which matures at 0800 GMT, and US consumer confidence figures at. 1400 GMT for the clue as to the relative performance of the two economies.
Softer-than-expected data on both continents last week suggest a downward risk.
“If data releases confirm the negative turnaround in macro outlook in Europe, it will be clearly euro-negative,” said Terence Wu, FX strategist at Singapore’s OCBC Bank.
“$ 1.17 remains the key level that may trigger a deeper sale, but the pair may need to break the $ 1.1850 / 80 resistance to make the track look more comfortable.” (Reporting by Tom Westbrook; Editing by Shri Navaratnam and Jacqueline Wong)