U.S. Dollar Advances On Rising US-China Trade Worries
May 29 2019 - 4:44AM
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The U.S. dollar strengthened against its most major counterparts
in the European session on Wednesday, as investors flocked to
safe-haven assets on global growth worries in the wake of
heightened trade tensions between the U.S. and China.
European shares fell following news that Beijing was ready to
use its dominance of rare earths as a counter in its trade battle
with Washington.
The U.S. imports about 80 percent of its rare earth elements,
used in a host of electronic components, from China.
In another development, Huawei Technologies Co Ltd has filed a
motion for summary judgment in its lawsuit against the U.S.
government.
"The U.S. government has provided no evidence to show that
Huawei is a security threat. There is no gun, no smoke. Only
speculation," the company's chief legal officer Song Liuping said
in a statement.
U.S. treasury bonds rose, sending yields on 10-year treasuries
to their lowest levels since September 2017. Yields move inversely
to bond prices.
The benchmark yield on the 10-year treasury note declined to
2.23 percent.
Italy's dispute over its budget with the European Union also
kept investors nervous.
The currency was lower against its major rivals in the Asian
session, excepting the euro.
The greenback climbed to a 6-day high of 1.2626 against the
pound from Tuesday's closing value of 1.2653. If the greenback
rises further, 1.24 is possibly seen as its next resistance
level.
The greenback bounced off to 109.42 against the yen, from a
2-week low of 109.15 touched at 3:15 am ET. On the upside, 111.00
is possibly seen as the next resistance level for the
greenback.
Bank of Japan Governor Haruhiko Kuroda said Japan has difficulty
in re-anchoring long-term inflation expectations from inflation
below the target level and suggested examining how best to manage
inflation expectations within the flexible inflation targeting
framework.
Many advanced economies experience very sluggish price
development despite significant improvement in economic activity,
the banker said. This, in turn, raised concerns about the
credibility of inflation targets.
The U.S. currency that finished Tuesday's trading at 1.1160
against the euro moved up to a 6-day high of 1.1148. The next
possible resistance for the greenback is seen around the 1.09
region.
Figures from the Federal Employment Agency showed that Germany's
unemployment climbed sharply in May for the first time in nearly
two years, defying expectations for further decline.
The number of unemployed rose by 60,000 month-on-month, while
economists had expected a decline of 7,000. In April, there was a
fall of 12,000.
The greenback firmed to near a 5-month high of 1.3522 against
the loonie, 5-day highs of 0.6911 against the aussie and 0.6515
against the kiwi, up from yesterday's closing values of 1.3493,
0.6923 and 0.6540, respectively. The greenback is likely to test
resistance around 1.37 against the loonie, 0.68 against the aussie
and 0.64 against the kiwi.
In contrast, the greenback declined to 1.0050 against the franc,
compared to 1.0076 hit late New York Tuesday. The greenback is seen
finding support around the 0.99 region.
Survey from the Zurich-based KOF Swiss Economic Institute showed
that Switzerland's economic expansion remained sluggish in May,
touching its lowest level in three months.
The KOF Economic Barometer fell to 94.4 in May from 96.2 in
April, said Wednesday. Economists had expected a modest improvement
to 96.5.
Looking ahead, at 10:00 am ET, the Bank of Canada announces its
interest rate decision. Economists expect the benchmark rate to
remain at 1.75 percent.
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