* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Recasts, new throughout; adds analyst quotes; changes
dateline, previous LONDON)
By Kate Duguid
NEW YORK, Aug 14 (Reuters) - The Japanese yen jumped to a
session high against the dollar on Wednesday after the U.S.
Treasury bond yield curve inverted for the first time since 2007
and investors, gripped by fear of a looming global recession,
fled to the safety of perceived safe-haven assets.
An inversion of the yield curve - when the spread between 2-
and 10-year Treasury yields US2US10=TWEB falls below zero - is
an indicator of coming recession. The chill the inverted curve
sent through global markets was compounded by weak data from
China and Germany and waning optimism about progress reported in
U.S.-China trade talks on Tuesday.
The yen JPY= , already stronger on the day, was boosted by
the inversion and was trading up 0.73% at 105.94, though still
off a 1-1/2-year high -excepting a flash crash in January - hit
Monday.
"There is plenty of doom and gloom to spread across the
globe," said John Doyle, vice president for dealing and trading
at Tempus Inc in Washington. The U.S. yield curve "is a major
recession indicator. Germany, Italy and the UK are likely headed
for a recession. Today's Chinese data was shockingly bad."
Data on Wednesday showed the Chinese economy has continued
to weaken. Industrial output rose in July at the slowest pace in
more than 17 years. Elsewhere, slumping exports sent Germany's
economy into reverse in the second quarter. On Tuesday, the dollar gained dramatically against the yen
after U.S. President Donald Trump backed off his Sept. 1
deadline for imposing 10% tariffs on remaining Chinese imports,
delaying duties on cellphones, laptops and other consumer goods.
The announcement came after renewed trade discussions between
U.S. and Chinese officials. Those gains were reversed overnight, however, as skepticism
about the progress began to weigh.
"I thought yesterday's risk-on move was going to be
short-lived, which looks to be right," said Doyle. "Reopening
talks with China is a good step, but there has not been any real
progress in months, so I think markets are starting to discount
efforts by the U.S. or China to de-escalate because recent
history has shown that little comes from it."
The dollar index .DXY , a measure of the dollar against a
basket of currencies, was 0.15% higher in midmorning trade at
97.959. While an inverted yield curve may have raised fears
about the U.S. economy, fundamentals in other G10 countries look
worse, boosting the dollar's appeal.
China's offshore yuan CNH= gave up some of its earlier
gains on Wednesday as the weaker-than-expected economic data
tempered optimism generated by the U.S. decision to delay
tariffs.
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US Treasury curve inverts https://tmsnrt.rs/2YLaA5f
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