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·         The U.S. dollar rallied against most currencies on Wednesday, including against traditional safe-havens like the Swiss franc and Japanese yen, after a moderation in the U.S. administration’s approach to Chinese investment.

Expectations that the Federal Reserve will continue raising interest rates, after the European Central Bank delayed its planned rate increases have been a key driver for a two-month rally in the dollar.

The U.S. dollar index, which measures the greenback against a basket of six currencies, was up 0.65 percent at 95.274, on pace for its second day of gains.

The euro was 0.76 percent lower at $1.1557, under pressure from worries about the trade conflict, the threat of a political crisis in Germany, and uncertainty over a European Union summit dealing with immigration.

The dollar was up 0.15 percent against the yen at 110.21 yen, and advanced 0.64 percent against the franc. The Japanese and Swiss units tend to benefit at the dollar’s expense in times of geopolitical and financial tensions.

·         U.S. President Donald Trump said on Wednesday he will use a strengthened national security review process to thwart Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions.

·         U.S. President Donald Trump said on Wednesday he will use a strengthened national security review process to thwart Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions.

The Treasury Department has recommended that Trump use the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control investment deals. The legislation expands the scope of transactions reviewed by the interagency panel to address security concerns, Trump said.

·         U.S. Treasury yields fell to four-week lows on Wednesday on concerns that trade wars will harm economic growth, even after U.S. President Donald Trump indicated that he would not impose restrictions on Chinese investments in U.S. technology firms.

Benchmark 10-year notes US10YT=RR gained 13/32 in price on the day to yield 2.833 percent, the lowest since May 31 and down from 2.880 percent late on Tuesday.

The yield curve between two-year and 10-year notes US2US10=TWEB flattened to 32 basis points, the lowest level since 2007.

·         Rating agency Moody’s Investor Service said on Wednesday a strengthening US dollar since mid-April has increased the credit risk of several emerging markets due to currency depreciation.

A Moody’s report said a strong dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey, and Zambia.

Chile, Colombia, Indonesia, and Malaysia are not vulnerable in the near term, the report said.

·         Orders for durable goods fell 0.6% in May following a revised 1% decline in April, the government said Wednesday.

The biggest drop in new orders for cars and trucks since 2015 spurred the second straight decline in demand for durable goods, perhaps a sign that intensifying trade disputes between the Trump administration and other countries are causing businesses to hesitate.

·         Two major auto trade groups on Wednesday warned the Trump administration that imposing up to 25 percent tariffs on imported vehicles would cost hundreds of thousands of auto jobs, dramatically hike prices on vehicles and threaten industry spending on self-driving cars.

A coalition representing major foreign automakers including Toyota Motor Corp, Volkswagen AG (VOWG_p.DE), BMW AG, and Hyundai Motor Co, said the tariffs would harm automakers and U.S. consumers. The administration in May launched an investigation into whether imported vehicles pose a national security threat and President Donald Trump has repeatedly threatened to quickly impose tariffs.

·         The Federal Reserve should continue to gradually raise interest rates to lower the risk of a major policy error, Boston Federal Reserve President Eric Rosengren said on Wednesday.

“We haven’t seen much of a trade-off between inflation and unemployment,” Rosengren said following a speech at the Peterson Institute for International Economics in Washington. “That gives us the luxury to be more gradual, and I think there’s some real benefits to being gradual. I think if we’re gradual, we’re less likely to make serious mistakes.”

The best way for the U.S. Federal Reserve to prolong the nation’s economic expansion is to pursue a monetary policy path where the economy does not run above capacity, Boston Fed President Eric Rosengren said on Wednesday.

Rosengren, who has said the U.S. central bank would probably need to raise interest rates a total of at least four times this year, also repeated his call for the Fed to consider adopting an inflation range target instead of a specifically targeted rate.

·         The effects of U.S. tariffs and tighter mortgage rules will “figure prominently” in the Bank of Canada’s interest rate decision in July but central bank Governor Stephen Poloz kept markets guessing on Wednesday on whether it would be a hike or a hold.

·         Oil prices jumped on Wednesday as plunging U.S. crude stockpiles compounded supply worries in a market already uncertain about Libyan exports, a production disruption in Canada and Washington’s demands that importers stop buying Iranian crude from November.

U.S. crude futures CLc1 rose $2.23, or 3.16 percent, to settle at $72.76 a barrel. The contract touched $73.06 a barrel, the highest since Nov. 28, 2014. Brent crude LCOc1 rose $1.31, or 1.7 percent, to settle at $77.62 a barrel.

Reference: Reuters, Market Watch