Dollar off six-week lows versus yen, little response to Mueller report

March 25, 2019

By Shinichi Saoshiro

TOKYO (Reuters) – The dollar edged back from a six-week low against the yen early on Monday, as a degree of calm returned to the market gripped by fears of a recession in the United States.

The greenback had tumbled on Friday as the spread between 3-month Treasury bills and 10-year note yields inverted for the first time since 2007 following weak U.S. manufacturing PMI data.

An inverted yield curve has historically signaled an impending recession.

Cautious comments from the U.S. Federal Reserve last week had also raised worries about the growth outlook in the United States and the rest of the world.

The dollar was up roughly 0.2 percent at 110.13 yen after sinking to 109.745 on Friday, its lowest since Feb. 11.

“The dollar’s slide on Friday appeared to have been an algo-led reaction to the yield curve inversion and quite simply overdone. Some bargain hunting by market participants emerged to support dollar/yen,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.

“The response, on the other hand, to the Mueller report has been limited.”

Special Counsel Robert Mueller found no evidence of collusion between President Donald Trump’s campaign team and Russia, and did not present enough evidence to warrant charging Trump with obstruction of justice, U.S. Attorney General William Barr said on Sunday.

The dollar index was unchanged at 96.651 after scraping out a gain of 0.15 percent on Friday.

The euro was little changed at $1.1297. The common currency has lost roughly 0.7 percent on Friday after a much weaker-than-expected German manufacturing survey raised concerns for Europe’s biggest economy and the wider euro zone.

The Australian dollar, viewed as liquid proxy for global growth, stood little changed at $0.7077.

The pound was 0.1 percent lower at $1.3200

Sterling had rallied 0.8 percent on Friday, helped by a weaker euro and after European Union leaders gave British Prime Minister Theresa May a two-week reprieve to decide how Britain will leave the European Union.

(Editing by Shri Navaratnam)

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