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Dollar Falls, Pound Rallies After U.K. Election -- Update

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12/13/2019 | 05:54pm EST

By Ira Iosebashvili

The dollar fell Friday, pressured by a postelection rally in the British pound.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.1% at 90.24, pressured by a 1.3% rally in the pound.

Investors have piled into the British currency on expectations that a resounding victory by Conservatives in the U.K's Dec. 12 election will ensure a smooth, orderly Brexit.

Sterling's rise from multiyear lows in September has made it one of the market's best-performing currencies, having risen by more than 6% against the dollar over the last 12 months. It was at $1.3327 in late afternoon New York trading.

Some market participants believe the pound's rally might not have much further to run.

A Tory victory was "already the widespread assumption in the market before the election. Consequently, we see little room for the feel-good factor to last longer than a few days," analysts at ING said in a note to investors. "The focus in the first half of next year will quickly turn to the challenge of negotiating a trade deal in a very short amount of time."

In fixed income, yields on the benchmark U.S. 10-year Treasury note settled at 1.820%, from 1.901% on Thursday, following worse-than-anticipated retail sales data and growing uncertainty over the details of a preliminary agreement reached by the U.S. and China in their long running-trade war. Bond yields fall as prices rise.

The 10-year yield declined early in the session after data showing U.S. retail sales advanced at a lackluster pace in November stoked demand for government bonds, a popular haven for nervous investors.

Yields declined again after Chinese trade negotiators said the U.S. would remove tariffs in stages, declining to disclose details on the scale of the tariff reduction or of its purchases of U.S. farm products.

President Trump had tweeted that the two sides had agreed "to a very large Phase One Deal with China," adding that the 25% tariffs on Chinese imports would remain but that the 15% levies on other goods would be cut in half.

"Investors were hoping for more detail on this deal," said George Gero, managing director at RBC Wealth Management.

Write to Ira Iosebashvili at ira.iosebashvili@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
EURO / BRITISH POUND (EUR/GBP) 0.17% 0.8524 Delayed Quote.0.73%
EURO / US DOLLAR (EUR/USD) -0.42% 1.1088 Delayed Quote.-0.53%
US DOLLAR INDEX 0.31% 97.62 End-of-day quote.0.84%
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