* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Recasts, new throughout)
By Kate Duguid
NEW YORK, Aug 27 (Reuters) - Renewed caution about resolving
the U.S.-China trade war drove investors to safe-haven assets on
Tuesday, deepening the Treasury yield curve inversion and
lifting the Japanese yen against the dollar.
Ten-year Treasury yields US10YT=RR , a bellwether of market
sentiment about the country's overall economic health, fell
faster than 2-year yields US2YT=RR , deepening the inversion
between the two. The inversion, a widely accepted recession
indicator, pressured the dollar days after the United States and
China, the world's two biggest economies, raised tariffs against
each other.
"You have seen a push deeper into inversion in the 2s/10s
curve. Today, it's hard to put your finger on one specific
driver of that inversion - though that might be contributing to
the general sense of risk-off in the market," said Brian
Daingerfield, macro strategist at RBS (LON:RBS) Securities.
On Friday, China said it would increase tariffs on $75
billion worth of American goods. The United States retaliated by
saying it would raise existing tariffs on $250 billion of
Chinese goods to 30% from 25% on Oct. 1.
On Monday, Trump said Chinese officials had contacted U.S.
trade counterparts overnight and offered to return to the
negotiating table, sparking a wave of so-called risk-on trades,.
However, doubts crept in after a Chinese Foreign Ministry
spokesman on Tuesday said he was unaware that there had been any
recent phone call, after U.S. Treasury Secretary Steven Mnuchin
said there had been contact between the two sides. The Commerce Ministry, which typically releases
statements on trade calls, did not respond to a request for
comment.
The Japanese yen JPY= strengthened 0.34% to 105.75, a day
after hitting a 2-1/2-year high. It has risen 3.45% against the
dollar this year as trade tensions have mounted.
Elsewhere, the euro was trading slightly lower at $1.1090
EUR= , but was off earlier lows as Italian stocks rallied on
hopes that a snap election could be avoided by an arrangement to
form a new government in Rome. "The overall sense is that we continue to have uncertainty
on a number of different fronts whether it be the China-U.S.
trade war, politics in Europe, Brexit, a general slowdown in
China or other issues," Daingerfield said.
The pound was up 0.6% against the dollar, at $1.2288 GBP= ,
and by 0.69% against the single currency at 90.24 pence
EURGBP= after Britain's opposition Labour Party leader, Jeremy
Corbyn, said he would do everything necessary to prevent Britain
leaving the European Union without a divorce deal on Oct. 31.