· The dollar fell against the Japanese yen on Tuesday, as worries about flagging global growth and concerns about continuing U.S.-Chinese trade tensions drove investors to seek out safe-haven assets.
The dollar was 0.28 percent lower against the yen, which tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation.
The greenback fell against the yen after the International Monetary Fund on Monday trimmed its global growth forecasts for 2019 and 2020. The IMF said a failure to resolve trade disputes could further destabilize a slowing global economy.
A report that the United States had rejected China’s offer for preparatory trade talks put further pressure on the dollar.
The Trump administration turned down an offer by two Chinese vice-ministers to travel to the United States this week for preparatory trade talks because of a lack of progress on two important issues, the Financial Times reported on Tuesday, citing people briefed on the talks.
Data showing U.S. home sales tumbled to their lowest level in three years in December and house price increases slowed sharply, suggesting a further loss of momentum in the housing market, also weighed on the dollar.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 96.303 after touching an earlier high of 96.484.
The Japanese yen, widely seen as a safe-haven currency, traded at 109.39 against the greenback after seeing lows above 109.5 in the previous session. The Australian dollar was at $0.7124 after seeing highs above $0.714 yesterday.
· U.S. government debt yields fell on Tuesday as the U.S. government shutdown and trade fears between Washington and Beijing stoked fears of slower economic growth.
The yield on the benchmark 10-year Treasury note fell about 4 basis points to 2.755 percent at 10:57 a.m. ET, while the yield on the 30-year Treasury bond dropped to 3.074 percent. Bond yields move inversely to prices.
· The euro was steady near a three-week low as morale among German investors improved slightly in January, but their assessment of the economy’s current condition deteriorated to a four-year low, a survey showed on Tuesday, sending mixed signals for the growth outlook of Europe’s largest economy.
· Sterling rose after strong employment data suggested Britain’s labor market remained robust despite an economic slowdown ahead of Brexit. The pound was up 0.52 percent at $1.2957.
· The White House rejected a trade planning meeting with Chinese counterparts this week due to outstanding disagreements between the two sides over the enforcement of intellectual property rules.
Officials from the U.S. trade representative's office were set to meet with two Chinese vice ministers this week to try to resolve trade differences before the March 1 deadline, but the meeting was called off, a source familiar with the situation confirmed to CNBC's Kayla Tausche.
Should Beijing and Washington fail to agree on a permanent solution, President Donald Trump has said he will reinforce punitive tariffs on roughly half of all Chinese exports to the U.S.
White House economic advisor Larry Kudlow denied that an official meeting had been canceled, telling CNBC on Tuesday that no intermediate meetings had been scheduled other than the visit by Liu next week.
Asked for comment, the White House told CNBC that "the teams remain in touch in preparation for high level talks with Vice Premier Liu He at the end of this month." The Treasury Department and the U.S. trade representative's office did not respond to requests for comment.
"I would kind of characterize negotiations as generally moving in the right direction. Last week, China offered a fig leaf in lowering tariff rates and agreed to import a trillion dollars of U.S. goods by 2024," said Joseph Lupton, global economist at J.P. Morgan.
· The U.S. Senate shifted slightly closer on Tuesday to resolving a month-long partial government shutdown, but there was no sign of relief anytime soon for 800,000 federal workers who are furloughed or working without pay.
Republican Senate Majority Leader Mitch McConnell laid the groundwork for a vote on Thursday on a Democratic proposal to fund the government for three weeks, without attaching the $5.7 billion in U.S.-Mexico border wall funding demanded by President Donald Trump. The president has opposed similar legislation in the House of Representatives.
A Trump administration official said on Tuesday the president still intended to deliver his State of the Union speech on Jan. 29, even though House Speaker Nancy Pelosi, the top U.S. Democrat, had recommended he delay it because of the shutdown.
· A partial shutdown of the U.S. government, which enters its second month on Wednesday, has delayed the publication of key economic data, leaving investors and businesses to follow their intuition and gut instincts as they make critical decisions.
Among agencies affected is the Commerce Department, leading to the suspension of the publication of data compiled by its Bureau of Economic Analysis (BEA) and the Census Bureau. The Labor Department has not been affected and its Bureau of Labor Statistics (BLS) continues to publish data, including the closely watched monthly employment report.
· British opposition Labour Party leader Jeremy Corbyn moved a step closer to paving the way for another referendum on European Union membership by trying to use parliament to grab control of Brexit from Prime Minister Theresa May.
After May’s Brexit divorce deal was rejected by 432-202 lawmakers last week, the biggest defeat in modern British history, some lawmakers are trying to take control of Brexit from May’s weakened minority government.
May on Monday proposed tweaking her deal, a bid to win over rebel Conservative lawmakers and the Northern Irish party which props up her government, but Labour said May was in denial about the crushing defeat of her plans.
· The Bank of Japan is set to cut its inflation forecasts and maintain its ultra-loose monetary policy on Wednesday, as pressure on the economy mounts in the face of slowing global demand, dealing another blow to its years-long efforts to foster durable growth.
The deteriorating global outlook also means the BOJ is some way off from exiting a sweeping stimulus program begun in 2013, which policymakers have acknowledged will do more harm than good the longer it is retained.
“On top of a planned sales tax hike in October, risks to overseas economies are heightening and stock prices remain volatile. Under such circumstances, the BOJ sees no merit in suggesting policy normalization,” said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.
“Governor (Haruhiko) Kuroda will likely vow to keep current easing while analyzing costs and effects of such policy. He may even voice readiness for further easing. He needs to wait until global uncertainties fade before laying the ground for policy normalization.”
· Oil prices tumbled on Tuesday as China posted its weakest economic expansion in nearly three decades and the IMF revised its global growth forecast lower, raising fresh concerns about fuel demand.
Crude futures and equities came under renewed pressure in afternoon trading after the Trump administration canceled a meeting with Chinese counterparts to advance trade negotiations.
U.S. West Texas Intermediate crude futures ended Tuesday’s session down $1.23, or 2.3 percent, to $52.57. Brent crude, the international benchmark for oil prices, dropped $1.20, or 1.9 percent, to $61.54 just before 2:30 p.m. ET.
Reference: CNBC
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