Dollar Slips from Seven-Week Highs
The U.S. dollar traded modestly lower on Wednesday morning in Asia while the British pound headed higher on hopes that a Brexit deal may be forthcoming. On Tuesday the dollar index hit a seven-week high of 96.163 .DXY, but it declined slightly on Wednesday to trade at 95.60 .DXY as of 12:59 p.m. HK/SIN.
The greenback eased against most of its primary trading partners, with the notable exception being the Japanese yen. The dollar was up 0.11 percent against the yen to 113.05 in the early afternoon in Asia. Rising U.S. bond yields have helped support the dollar in recent sessions, and many analysts expect that Wednesday’s selloff is not a sign of long-term struggles. The benchmark 10-year Treasury bond was at 3.21 percent on Wednesday, just off its seven-year high of 3.261 hit on Tuesday.
IMF Expresses Concerns
The International Monetary Fund (IMF) said on Wednesday that “a further escalation of trade tensions, as well as rising geopolitical risks and policy uncertainty in major economies, could lead to a sudden deterioration in risk sentiment.” The IMF report noted specific risk for emerging market countries which have recently come under economic pressure on both the stock and currency markets.
Global stock markets have traded mixed in recent days, with two of the three major Wall Street indexes closing lower on Tuesday. Japans Nikkei 225 was trading flat on Wednesday while the Hang Seng Index gained 0.43 percent. The Shanghai Composite and the Shenzhen Composite were both trading lower while traders weighed their options after U.S. President Donald Trump showed signs of escalating the U.S.-Sino trade war if needed. Still, the IMF said in its statement that the Chinese economy remains “broadly stable” despite the trade war.