Possible US recession renewed pressure on dollar due to an inversion in part of the Treasury yield curve.
Growing concerns about slowing U.S. growth undermined the greenback and sounded an alarm to many investors. The US currency has enjoyed months of a beyond compare performance against its major traded rivals. The dollar has been under pressure since FED Chairman said last Wednesday that U.S. interest rates were nearing neutral levels.
EU wants to upgrade EURO role at international level
The European Commission pushed for broader global use of euro to challenge dollar by publishing non-binding proposals. EU wants to upgrade its currency role at international level and its use as a reserve currency against the dollar.
The move forms part of the steps taken to deal with US decision to withdraw from JCPOA. This has forced many European companies to stop trading with Iran to avoid U.S. sanctions.
The most effective way to widen the euro’s international role was to overhaul the 19-country currency union.
The Commission admitted the dollar dominance was due to: higher liquidity, lower transaction costs and its use as a benchmark in commodities and derivatives markets.
Forex – Commodities – Possible US recession sends Dollar down
Against a basket of six rivals, the dollar edged down 0.1% to 96.832. However, the greenback has fallen 0.4% this week.
Against the yen, the dollar rose 0.2 percent to 112.97 yen, clawing back some of the previous session’s losses. On Tuesday, the greenback shed nearly 0.8% against the yen, which acts as a safe-haven in times of geopolitical and financial turmoil.
The euro edged up 0.1% to $1.1358, buoyed by reports that ECB is exploring ways to withdraw stimulus in 2019. Against the pound, the euro was 0.1% weaker at 89.06 pence.
The Australian dollar slumped more than 0.7% against the greenback as disappointing economic data further faded the chance of a rates rise. The Aussie moved sharply off a four-month top of $0.7394 hit early in the week.
The pound traded 0.1% lower moving further above a June 2017 low of $1.2659 hit in the previous session. The pound and the British stock market top the list of bearish bets among global investors due to Brexit concerns.
In commodities, oil recouped some of its early losses on Wednesday, mirroring a modest recovery in global equities.
Brent crude was down 22 cents on the day at $61.86 a barrel, but above a session low of $60.80. U.S. futures had eased 6 cents to $53.19. The oil price rallied by nearly 10% over Monday’s and Tuesday’s sessions, but has now retraced half of those gains.
Sources: Reuters, CNN money, Bloomberg
PLEASE NOTE The information above is not investment advice.