USD News: Dollar Drops amid US-China Trade Truce
USD NEWS – On Tuesday, the dollar declined in Asia. This is amid the shift of traders to the greenback in favor of risk-sensitive currencies on the softening US-China trade tensions.
The US dollar index, which tracks the greenback’s strength against a basket of other currencies, traded at 96.667, lower 0.31%.
The index declined following the reports that US President Donald Trump and Chinese President Xi Jinping’s promise to halt tariffs. This was according to Chinese Foreign Minister Wang Yi and added that both leaders will end the introduction of new tariffs for 90 days.
Meanwhile, the AUD/USD pair increased 0.2% to 0.7375. This followed after the Reserve Bank of Australia placed the official cash rate on hold at expected 1.5%. The RBA kept it on hold for 28 months consecutively.
The NZD/USD pair added 0.5% to 0.6961.
Economists are expecting that the RBA will keep the rate on hold until the fourth quarter of 2019. This was according to reports from Bloomberg.
After the news, the USD/CNY pair slumped 0.6% to 6.8420.
People’s Bank of China Governor Yi Gang said that the central bank will keep its monetary policy flexible. However, he stated that there must be a “slow release of air” and “soft landing” once the economy started to overheat.
The central bank will likewise put effort for the promotion of technology in China’s financial technology industry. This aims to improve the international confidence in the yuan, according to Yi.
Meanwhile, the China Securities Journal revealed that there the US-China interest rate spread is at a low level.
USD News: Dollar softens on the decline of US bond yields
On Tuesday, the dollar weakened in Asia on the drop of the U.S. Treasury yields to three-month lows. This is along with investors’ worries over the potential pause in the rate-hike cycle of the Federal Reserve. That and also indications of recession observed in a yield curve inversion.
The US 10-year Treasury yield declined 2.94 percent. This was its lowest recorded level since mid-September. Since July 2007, the difference in yield between the U.S. 2-year and 10-year narrowed to its smallest.
“Falling U.S. yields are a negative for the dollar, especially versus the major currencies,” said NAB Senior Currency Strategist Rodrigo Catril.
On Monday, the curve between 3-year and 5-year notes inverted for the first time since 2007. Further, it was last at minus 1.2 basis points.
The investors’ key focus is the 2-year and 10-year yield curve. Meanwhile, inversion is considered as a determinant of a US recession.
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