The dollar dropped to a three-week low as growing bets on an interest rate cut by the Fed weighed on Treasury yields, while wider worries about economic growth sent investors purchasing into the safe-haven yen.
St. Louis Federal Reserve President James Bullard said a rate cut may be needed “soon” given frail U.S. inflation and the warned to global development posed by worldwide trade spats.
The Japanese yen has been the main beneficiary from a move to assets investors thinks a safer bet. The yen increased 0.2 percent to 107.845 yen per dollar, its highest since January 10 – hit in the preceding session.
That damaged the U.S. dollar, which versus a basket of currencies tumbled 0.1 percent to a three-week low, dropping less than 97 for the first time since April 18.
“As long as it (the dollar) is at the center of the trade conflict, U.S. yields fall due to concerns about real economic effects and the market is literally calling out for rate cuts, there are no positive arguments supporting the dollar,” Commerzbank analyst Antje Praefcke said.
Other strategists were less bearish on the dollar, arguing that rate cuts had already been priced into the currency and noting that if global growth does worsen, the dollar should benefit from its safe-haven credentials.
The euro soared 0.3 percent to $1.1274, its peak since April 18, helped by dollar feebleness.
The European Central Bank meets on Thursday, and investors are also eyeing flash euro zone inflation data. Analysts remain cautious on its prospects.
“Considering the euro zone’s close ties with the Chinese economy, the euro is one of the currencies that stands to be most affected by a Chinese economic downturn – a risk associated with the escalating U.S.-China trade war,” said Tokyo-based Junichi Ishikawa, senior FX strategist at IG Securities.
The ASX 200 in Australia also gained 0.41 percent to near 6,358.50 as majority of the parts increased. The Australia and New Zealand Banking Group gained 0.9 percent, while the Commonwealth Bank of Australia jumped 1.24 percent. The Westpac soared 1.36 percent and National Australia Bank increased 0.79 percent.
The Australian dollar last changed hands at $0.7000, after moving a previous low of $0.6985.
The pound soared 0.2 percent to $1.2684, increased from a five-month trough of $1.2560.
Sterling has tumbled on the prospect of Eurosceptic PM changing Theresa May who could push for a further decisive break from the European Union, Britain’s biggest trading partner.
- Trading Instrument