© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this photo illustration© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this photo illustration

By Richard Leong

NEW YORK (Reuters) – The dollar was little changed on Wednesday, hovering near an 11-month peak against a basket of major currencies as China’s signal of a tolerance of a stronger yuan offset anxiety about the global trade conflict.

The greenback, as well as the yen and Swiss franc, remained well supported as traders braced for possibly another round of tariffs.

“The market is holding its breath on what is the next development,” said Mazen Issa, senior FX strategist at TD Securities in New York. “We just went through a significant policy move in trade.”

Before Wednesday’s market open, the People’s Bank of China cut the yuan’s midpoint rate to 6.4586 per dollar, the weakest level since Jan. 12 and much stronger than market models had suggested.

The move is seen as a bid to stabilize investor sentiment and avert the yuan from sagging further.

On Tuesday, the Chinese currency fell a five-month low of 6.4948 yuan in the offshore market following U.S. President Donald Trump’s threat of a 10 percent tariff on $200 billion of Chinese imports.

U.S. Commerce Secretary Wilbur Ross said the White House will likely keep up pressure on Beijing in an attempt to reach a deal on greater American access to Chinese markets and narrow its trade surplus with the United States.

In this climate of rising trade tensions, heads of major central banks spoke of this risk in their economic outlook at a conference in Sintra, Portugal.

U.S. Federal Reserve President Jerome Powell said “in principle changes in trade policy could cause us to have to question the outlook.”

Still Powell and his peers at the European Central Bank and Bank of Japan, Mario Draghi and Haruhiko Kuroda, offered no fresh views on their policy stance.

At 11:50 a.m. EDT (1550 GMT), an index that tracks the dollar against the euro, yen, sterling and three other currencies (DXY) was down 0.09 percent at 94.994 after touching an 11-month peak of 95.299 earlier on Wednesday.

The euro (EUR=) was little changed at $1.1584 and 127.56 yen (EURJPY=).

The greenback was steady against the Japanese currency at 110.11 yen.

Many emerging currencies steadied after Tuesday’s losses due to trade fears. The Mexican peso gained 0.7 percent on the day, while the South African rand rose 0.9 percent.

The Australian dollar, seen as a proxy on market sentiment toward China, fell to a 13-month low of $0.73475 on Tuesday before bouncing a bit to $0.73805.

The Swiss franc dipped 0.2 percent to 0.9959 per dollar, erasing the prior day’s gains.

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