The dollar continued to struggle against its primary trading partners on Wednesday, rebounding slightly after hitting a two-week low on Tuesday as traders tried to make sense of news surrounding the brewing trade war between China and the United States. The dollar was lower against the yen as of 1:20 p.m. HK/SIN, trading at 109.92, once again falling below the 110 handle hit earlier in the session. It was unchanged against the euro, trading at $1.1643. The greenback did managed to eke out modest gains against the British pound, the Canadian dollar and the Swiss franc, sending the dollar index 0.04 percent higher to 94.70 .DXY.
The trade war is expected to pressure the dollar in the coming weeks, and analysts are expecting choppy trading ahead. More likely to cause sudden movements are other geopolitical and economic developments. On the radar now is Italy’s debt auctions which spurred a rise in Italian bond yields and send the euro 0.5 percent lower overnight. Uncertainty surrounding Britain’s potential for higher interest rates is also grabbing headlines and the lack of direction sent the pound 0.45 percent lower on Tuesday and down another 0.09 percent by the early afternoon on Wednesday.
Stock Markets Also Under Pressure
Currency markets weren’t the only ones affected by trade war worries. European stock markets closed flat on Tuesday, with the pan-European STOXX 600 clinging to it’s two-month lows after sliding 2 percent on Monday. The index is down 3 percent since the start of the year.
Asian markets were broadly lower on Wednesday, with Hong Kong’s Hang Seng Index sliding 0.81 percent and the Nikkei 225 declining 0.27 percent. The Shanghai Composite continued its dramatic downturn, losing another 1.01 percent on Wednesday. South Korea’s Kospi and Australia’s ASX 200 managed to gain some, with the Kospi up 0.01 percent and the ASX 200 up 0.09 percent.