* Dollar range-bound as markets look to U.S. politics and
Fed
* U.S.-China talks postponement welcomed, but uncertainty
looms
* Kiwi at 2yr low vs Aussie
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, Aug 17 (Reuters) - The dollar slipped marginally
and commodity currencies inched higher on Monday as investors
were relieved by a delay in the review of the U.S.-China trade
pact which left the deal intact.
The moves in the Asia session were modest, as weak data and
uncertainty ahead of a week that includes Federal Reserve
minutes and the Democrats' nomination convention kept a lid on
sentiment.
Against a basket of currencies =USD the dollar traded
under gentle pressure at 92.987, roughly in the middle of the
range it has held since dropping to a two-year low in late July.
The risk-sensitive Australian dollar AUD=D3 inched up to a
week high of $0.7196, poking around the top end of a channel it
has traded in for a week. The oil-sensitive Canadian dollar
CAD=D3 also edged 0.1% higher to C$1.3253 per greenback.
The United States and China postponed a Saturday review of
their Phase 1 trade deal, people familiar with the plans told
Reuters, citing scheduling conflicts. "That's good news in the sense that it's something we can
place on the back burner for now," said National Australia Bank
senior foreign exchange strategist Rodrigo Catril.
"But there are other uncertainties coming up that need to be
resolved," he said, pointing to U.S. politics as a presidential
election looms, and new virus hot spots in Europe that could
challenge the perception that the euro is on an uptrend.
Markets are also looking to the Federal Reserve minutes from
last month's meeting, due to be released on Wednesday, for any
clues about an anticipated shift in the policy outlook.
Speculation is rife the Fed will adopt an average inflation
target, which would seek to push inflation above 2% for some
time to make up for the years it has run below it.
"The bond market is key here," said Chris Weston, head of
research at Melbourne brokerage Pepperstone. "If the Fed can
drive down real yields then the dollar will follow, and gold
will rally - and vice versa."
The yield on benchmark 10-year U.S. debt rose almost 15
basis points last week, its sharpest weekly rise in two months,
which weighed on the yen by attracting investment from Japan.
U.S. 10-year yields US10YT=RR dipped a tiny bit to 0.7012%
on Monday, while the yen was a tad firmer at 106.51 per dollar.
DIVERGENCE
Data releases across Asia on Monday painted a bleak picture
with currency investors unmoved by a couple of bright spots.
Japan was hit by its biggest economic contraction on record
in the second quarter and Thailand suffered its worst quarter in
22 years as the coronavirus battered exports and activity.
Thailand's contraction was a little better than market
expectations, but that failed to lift the baht.
The next noteworthy release is the New York Fed's Empire
manufacturing survey, due at 1230 GMT. It is expected to show a
slight pullback in conditions, and a surprise either way could
challenge the market belief that the economic fortunes of Europe
and the United States are diverging.
Early in the Asian afternoon the euro EUR=EBS was 0.1%
higher on the dollar at $1.1857 and sterling GBP= inched
forward to $1.3096.
The other area where a divergence is emerging is the
Antipodes, where anticipation of the Reserve Bank of New Zealand
taking rates negative next year is weighing on the kiwi.
New Zealand delayed a general election by a month on Monday
as it grapples with a new outbreak of the coronavirus in
Auckland.
The kiwi dipped 0.1% on the dollar to $0.6531 and fell to an
almost two-year low of NZ$1.1017 per Aussie AUDNZD= .
"The longer New Zealand is in its second lockdown, the
higher the risk of more monetary policy easing by the Reserve
Bank of New Zealand," said Commonwealth Bank of Australia
analyst Kim Mundy.
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Yield bounce arrests dollar decline https://tmsnrt.rs/3kSYAG3
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