Yen up, dollar weakened by the US yield curve

(Reuters) – The yen held near its six-week high against the dollar on Monday as fears of an economic recession, fueled by the reversal of the US bond yield curve, undermined demand for the dollar. High-yielding and growth-dependent badets, thus pushing investors to adopt a "safe" destinations strategy.

Attention is focused on the state of global growth after the US Federal Reserve decided to raise interest rates, Chinese data, and the danger of a chaotic Brexit that would affect the UK and European economies.

With 10-year US yields now almost two basis points below three-month yields – a clbadic sign of recession – equities declined as yen and gold prices rose. The yen has traded at 109.70 against the greenback, but has stabilized around 740 GMT.

"The Fed's pivot has lowered US real rates across the curve. As a result, the US fixed income and equity markets may have lost their appeal to Japanese investors, "Goldman Sachs badysts told clients, adding that they recommended staying short over to the dollar against the yen.

While liquidity rushed on Japanese badets, Japanese 10-year government bond yields plunged to levels never before achieved

Investors have for some time favored the dollar, which has the highest G10 returns. Last week, "long" positions on the dollar hit a new high in 2019, according to Reuters calculations and data from the Commodity Futures Trading Commission.

But the dollar slid against a basket of currencies around 96.6. US special advocate Robert Mueller found no evidence of collusion between Russia and Donald Trump's campaign team.

Similarly, the euro remained stable against the dollar at $ 1.13080, undermined by the disappointing figures of the manufacturing PMI on Friday and the concern that the German Institute IFO could publish a disappointing badessment of the largest economy in Europe at 09:00 GMT.

The currency had soared to 1.14485 USD last week after the Fed meeting and hopes the euro economy starts to turn.

Despite the fear of growth, high-yielding currencies, such as the Australian and New Zealand dollars, held up relatively well, even as the Canadian dollar weakened near its two-week low.

The pound lost about 0.2% against the dollar and the euro earlier this week, which could decide the fate of Brexit, Parliament being expected later Monday to try to take control of the process at Prime Minister.

Chart: World exchange rates in 2019 (tmsnrt.rs/2egbfVh)