The u.s. dollar reached a low of three weeks against a basket of currencies on Tuesday, as growing expectations of a reduction in interest rates by the Federal Reserve have weighed on the returns of the Treasury, while persistent concerns about the outlook for global growth boosted the yen.
The reference rate of the 10-year Treasury fell to its lowest level since September 2017, nearly 2%, after the president of the Federal Reserve bank of St. Louis, James Bullard, has stated that a reduction in the rate ” could be justified “, given the low inflation in the u.s. and the threat posed by the tensions of global trade on economic growth.
The japanese yen was the main beneficiary of the flight to the active shelters. It was close to the highest in four months 108,17 yen to the dollar at 11: 00 am.
The yen has weighed on the dollar index, which was 97,067 after reaching a low of three weeks 96,917 this night.
“As long as the dollar is at the center of the trade dispute, the us yields are falling because of concerns about the real economic effects, and the market demands literally interest rate cuts, no positive argument only supports the dollar,” said Antje Praefcke, analyst at Commerzbank.
Other strategists were less bearish on the dollar, arguing that the rate reductions were already built into the currency, and noting that if global growth deteriorates, the dollar should benefit from its safe haven status.
The euro rose 0.07% to 1,1248, helped by the weak dollar.
“Given the strong linkages of the euro area with the chinese economy, the euro is one of the currencies most affected by the slowdown of the chinese economy – a risk associated with the escalation of the trade war between the United States and China,” said Junichi Ishikawa, a strategist and principal currencies at IG Securities.
The australian dollar was little changed after the Reserve Bank of Australia has lowered interest rates to a record level of 1.25%, as expected.
The british pound was little changed at 1,2661, after a low of five months set at 1,2560 Friday.
The pound declined on the prospect of a prime minister’s eurosceptic replacing Theresa May, who could push for a break in more decisive of the European Union, the first trade partner of the United Kingdom.
