SINGAPORE- The dollar rebounded slightly on Thursday thanks to a rise in US Treasury yields, though currencies traded in tight ranges as investors struggled to determine the impact of an escalating global trade war on US inflation and growth.
US President Donald Trump on Wednesday threatened further tariffs on European Union goods, as major US trading partners said they would retaliate for trade barriers already erected by him.
A rise in global trade tensions and worries over US recession risks have rattled global markets and sparked huge volatility in the foreign exchange market, as traders seesaw between relief and angst over Trump’s whipsawing policy changes.
Markets were a tad calmer in the early Asian session on Thursday as investors got a break from the flurry of headlines about US trade policy.
The dollar rose 0.05 percent against the yen to 148.31 recovering some of its losses from earlier in the week when it fell to a five-month low against the Japanese currency, as fears of an economic downturn in the US sparked a rush to the Japanese currency as a safe haven.
The Swiss franc similarly edged away from Monday’s three-month peak and last stood at 0.8817 per dollar.
Data released on Wednesday showed US inflation rose slightly less than expected in February, but the relief it offered could be temporary as the data did not fully capture the cascade of Trump’s tariffs.
“What is more uncertain is the outlook for future inflation and the state of US economic activity, thanks largely to the unpredictability of US trade policy,” said James Reilly, senior markets economist at Capital Economics.
“It is these issues driving markets, and (the) report gave little fresh insight into either of those.”
But US Treasury yields pushed higher as traders wagered on a pick-up in inflation down the line, with the benchmark 10-year yield last steady near a one-week top at 4.3047 percent.
