Dollar hits 4-month lows as Sino-U.S. tensions loom

RATE DOLLAR - LONDON. The U.S. dollar hit four-month lows against a basket of peer currencies on Thursday, resuming its slide as investors took a wait and see approach to tensions between the United States and China.

The United States gave China until Friday to close its consulate in Houston following allegations of spying.

China has vowed to respond, and the escalating tension between the world's two largest economies sent the yuan on its sharpest slide in nearly two months on Wednesday.

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That slide reversed on Thursday, with the offshore yuan bouncing back to the weaker side of the 7 per dollar mark.

"Retaliation for the Houston closure is now widely expected - the relative severity of which will offer markets some guidance on Beijing's engagement strategy into the 2020 elections," said UBS strategists in a note to clients.

"U.S.-China tensions generate volatility, but it is the stimulus and recovery dynamic that we expect will prove more dominant."

UBS forecast the yuan - a barometer of Sino-U.S. relations - would reach 6.8 per dollar by the end of 2020, and 6.7 by the first half of 2021.