The Japanese yen jumped to a session high against the dollar on Wednesday after the US Treasury bond yield curve inverted for the first time since 2007 and investors, gripped by fear of a looming global recession, fled to the safety of perceived safe-haven assets.
An inversion of the yield curve - when the spread between 2- and 10-year Treasury yields falls below zero - is an indicator of coming recession. The chill the inverted curve sent through global markets was compounded by weak data from China and Germany and waning optimism about progress reported in US-China trade talks on Tuesday.
The yen, already stronger on the day, was boosted by the inversion and was trading up 0.73% at 105.94, though still off a 1-1/2-year high -excepting a flash crash in January - hit Monday.
On Tuesday, the dollar gained dramatically against the yen after US President Donald Trump backed off his Sept. 1 deadline for imposing 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods. The announcement came after renewed trade discussions between US and Chinese officials.
The dollar index, a measure of the dollar against a basket of currencies, was 0.15% higher in midmorning trade at 97.959. While an inverted yield curve may have raised fears about the US economy, fundamentals in other G10 countries look worse, boosting the dollar's appeal.
Comments
Comments are closed.