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Dollar slips versus yen as China trade tensions weigh

17 June 2018

The European Central Bank said Thursday it would end in December the mass bond-buying used to buttress the eurozone economy, in a sign of confidence in the outlook for growth and inflation in the bloc.

The yen was 0.2 per cent weaker at ¥110.56 per dollar. The euro's drop pulled the dollar higher with the index up 0.1 per cent on the day at 93.81.

US stocks mostly rose Thursday, as markets get accustomed to the idea of investing with less of a safety net from central banks around the world.

Elsewhere, the Canadian dollar edged lower against its United States counterpart as the greenback broadly climbed and after Italy added to Canada's uncertain trade outlook, saying it will not ratify the European Union's free trade accord with the country.

The euro fell and eurozone stocks surged after the European Central Bank said it expected interest rates to remain at current record lows for at least another year. Persistently low inflation means that expectations are the 0.1% cash rate and ten year bond zero interest rate policy will remain.

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"It was mainly in German where sensitivity towards trade issues is stronger than elsewhere", she said.

Meanwhile, US/China relations are back in the limelight as US President Donald Trump's expected to pull the trigger on implementing $50bn's worth of tariffs on Chinese imports.

A broader slowdown could make it harder for the ECB to cut support if lower growth eases pressure on inflation, a threat to the bank's credibility as it has missed its inflation target of nearly 2 percent for over five years.

The Dow Jones Industrial Average fell 49.71 points, or 0.2 percent, to 25,151.49, but the S&P 500 gained 4.48 points, or 0.16 percent, to 2,780.11 and the Nasdaq Composite added 50.68 points, or 0.66 percent, to 7,746.38.

The decision represents a belief in the central bank that the eurozone economy, after years of weakness and recession, "is now sufficiently robust that it can start to withdraw monetary stimulus" says The Independent.

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Boosted by the ECB's announcement and positive comments on the euro from politicians in Rome, Italy's government bonds were on course for best week since Mario's Draghi's "whatever it takes" Outright Monetary Transactions programme was created in September 2012.

Just hours before the ECB's announcement, the US Federal Reserve hiked interest rates for the second time in 2018, bringing into sharp focus the fact that the flow of easy money in Europe and America over the past decade is gradually ending.

Oil markets edged up, despite the strengthening dollar and fears that Opec countries could decide to increase output at a meeting next week.

OIL: Benchmark U.S. crude lost 20 cents to $66.69 per barrel in electronic trading on the New York Mercantile Exchange.

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Dollar slips versus yen as China trade tensions weigh