Dollar Calculator: USD rebounds vs. yen as risk aversion ebbs
On Tuesday, the dollar made a rebound against the yen as Treasury yields pulled back from 15-month lows. Investors also reassessed the risks of a sharper downturn in the global economy.
Later in the day, the British lawmakers are scheduled to vote on a range of Brexit options causing the dollar to stick to a narrow range.
On Monday, the global markets recoiled in the wake of an inversion in the U.S Treasury yield curve signaling a recession in the past.
“The dollar has tracked U.S. yields. But the trend may have run its course, with little further downside seemingly remaining for yields,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
“The decline by U.S. equities has also slowed, and this has supported the dollar as it shows that the market’s economic prospects remain reasonably good with the Fed preparing to take a more dovish approach,” he said.
The dollar edged up 0.1% to 110.065 yen and put some distance from a 6-week low of 109.70 experienced the previous day. Fears of a global economic slowdown depressed U.S. yields and boosting investor demand for the yen, a perceived haven.
U.S. consumer confidence and housing-related data due later in the day could provide cues for the currency market.
“The dollar should draw further support if today’s economic indicators are robust, as strong data may be about the only factor to prevent Treasury yields from falling further,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
Dollar Calculator: Little change for the Pound after parliament took control of Brexit process
On Tuesday, the GBP changed little in Asia after Parliament took control of the Brexit process from Theresa May. By 11:33 PM ET (03:33 GMT), the GBP/USD pair slipped 0.1% to 1.3193.
Later on Wednesday, lawmakers are scheduled to vote on a range of withdrawal options. It gives parliament a chance to decide whether it can agree on a deal with closer ties to the European Union.
Last week, the Brexit date which was originally set for 29th March was deferred by at least two weeks to give May time to come up with a better Brexit solution.
However, on Monday, May said she still lacked support to put her Brexit deal. It has so far been rejected twice earlier in the year, to a third vote.
Pound was effectively flat at $1.3197 after spending the previous day confined to a narrow range when British MPs wrested control of the legislative agenda from the government for a day in a highly unusual bid to find a way through the Brexit impasse.
Meanwhile, the U.S. dollar index that tracks the greenback against a basket of other currencies edged down 0.1% to 96.018.
The 10-year U.S. Treasury yield stood at 2.430% after declining to 2.377% on Monday, its lowest since December 2017.
With little market-moving economic data point on the calendar, investor focus continued to center on falling treasury yields following inversion of part of the yield curve last week.
An inverted yield curve is widely known as a powerful indicator to predict a recession. A yield curve inversion has preceded every recession over the past 60 years.
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