* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, May 30 (Reuters) - The dollar edged towards a
one-week high on Thursday as trade tensions between China and
the United States led investors to seek shelter.
U.S. money markets are pricing in roughly two interest rate
cuts by January 2020 and the bond yield curve inverted further
overnight, signalling rising recessionary risks for the world's
biggest economy. But demand for dollars shows no sign of
abating.
Expectations for U.S. interest rates have taken a U-turn
since the end of 2018, when bond markets were betting on at
least two more rate increases, before trade tensions hit global
markets.
"The strength in the dollar is surprising given that markets
are now expecting multiple rate cuts by 2020," Commerzbank FX
strategist Ulrich Leuchtmann said.
Against a basket of other currencies .DXY , the dollar was
stronger at 98.22, with gains more pronounced against such other
currencies the euro and the pound. It was on track to rise for a
fourth consecutive month.
Risk appetite was low despite some gains in European stocks,
with bond yields sending recession warnings.
Some emerging-market currencies came under pressure. The
Indian rupee INR=D3 and the Indonesian rupiah IDR=ID
weakened. The Australian dollar AUD=D3 recovered some of its
overnight losses.
The spread between three-month U.S. Treasury bills and
10-year bond yields has inverted to its lowest level since
August 2017. Financial markets consider an inverted yield curve
a harbinger of recession.
The dollar was steady at 109.59 yen JPY= , about 0.5% above
the 109.02 yen it touched on May 13, its lowest in more than
three months.
Analysts said the yen, a safe haven backed by Japan's status
as the world's biggest creditor nation, remained relatively weak
because of domestic demand for dollars.
A Citibank report said long dollar positions remained
significant in the currency market despite some recent
unwinding.
"As there's persistent yen-selling and dollar-buying from
Japanese investors when the rate approaches the 109.10 yen per
dollar level, it's not easy for the yen to rise above the 109
level," said Yukio Ishizuki, senior currency strategist at Daiwa
Securities.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Currency Performances https://tmsnrt.rs/2Iazj7L
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>