Better U.S. Yields Slightly Lift Dollar Amid Trade War Threat
The dollar gained slightly on Wednesday morning trade in Asia as yields on U.S. treasures bounced off lows but concerns lingered over a U.S.- China trade war that is heating up and hindering the recovery of the greenback.
The U.S. dollar index, which tracks the greenback against a basket of currencies, was up 0.11% to 94.75 at 11:55PM ET (3:55GMT).
The USD/JPY pair climbed 0.1% to 110.14. It fell to 109.55 on Tuesday as the yen strengthened after U.S. president Donald Trump stated that he had asked U.S. trade representatives to come up with a new list of Chinese goods that may potentially be targeted by additional tariffs.
The yen is a safe-haven currency. Demand for the yen increases in times of political tension and market turmoil.
The market has gone into risk-off mode after the announcement of the possible new 10 percent tariffs on $200 billion Chinese goods and an angry reply from Beijing saying that “the United States has initiated a trade war and violated market regulations and is harming the interests of not just the people of China and the U.S., but of the world.”
“The threat of a trade conflict is a theme that could eventually override tax cut-induced benefits the U.S. economy is experiencing at the moment,” said Shin Kadota, senior strategist at Barclays (LON:BARC) in Tokyo.
The AUD/USD pair hit 0.7386, up 0.14%, after dipping to a 13-month low of $0.7347 on Tuesday. The Aussie dollar is considered sensitive to shifts in sentiment towards China.
Elsewhere, The USD/CNY pair was down 0.11% to 6.4777The People's Bank of China (PBOC) set the yuan reference rate at 6.4586 versus Tuesday's fix of 6.4235