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Dollar Turns Negative as Flatter Yield Curve Spooks Traders

11/22/2017, 11:19:59 AMTrading Strategies
Dollar Turns Negative as Flatter Yield Curve Spooks Traders

The dollar turned negative on Tuesday as upbeat housing sector data failed to offset concerns over the long-term growth story of the US economy amid a flattening yield curve.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.12% to 93.91.

The Commerce Department said existing home sales increased 2% in October from the previous month to a seasonally adjusted annual rate of 548 million units. Economists were expecting a 0.7% rise to 5.42 million homes.

The upbeat economic data, however, failed to offset dollar weakness as traders continued to focus on a flattering yield curve amid ongoing weakness in 10-year treasury yields, pointing to concerns over the long-term growth potential of the economy.

The dollar has made a poor start to the week as a lack of top-tier economic data and lighter volumes ahead of the Thanksgiving US holiday on Thursday limited direction.

The euro, meanwhile, pared some of its losses against the dollar, shrugging off concerns over Eurozone geopolitical uncertainty which followed German chancellor Angela Merkel’s failure to form the country’s next government.

EUR/USD rose 0.05% to $1.1740, while EUR/GBP added 0.11% to £0.8875.

Sterling was roughly unchanged against the dollar at $1.3227 as traders continued to monitor Brexit proceedings after reports on Monday suggested that the British government was set to make the European Union an improved offer for the final financial divorce settlement.

Elsewhere USD/JPY fell 0.35% to Y112.48, while USD/CAD lost 0.35% to C$1.2775 as a rebound in the oil prices supported a move higher in the oil-sensitive Canadian dollar