U.S. Dollar Continues Slide As Risk-Sensitive Currencies Recover

The U.S. dollar was back under pressure Wednesday as a firmer tone for equities and other assets perceived as risky lifted risk-sensitive rivals.

On Tuesday, financial markets were shaken by economic data from China showing a slowing of economic activity in 2018 to a 28-year low, as well as reports that U.S. officials had cancelled or turned down a preparatory trade meeting with Chinese counterparts. Whitehouse economic adviser Larry Kudlow later denied this cancellation.

The ICE (NYSE:) DXY, +0.02% was slightly weaker, dipping 0.1% to 96.221, adding on from Tuesday’s slight loss. Its main rival, the euro , -0.0088% was slightly stronger at $1.1368, up from $1.1362.

Currencies like the Australian dollar , +0.1123% and Canadian dollar , -0.0449% which tend to perform better when appetite for assets perceived as risky is on the rise, recovered from their respective slides on Wednesday.

The Japanese yen , +0.48% weakened against the U.S. dollar on Wednesday, after gaining the previous day on haven-related buying. Ahead of the Asian market open, the Bank of Japan announced it kept its monetary policy steady, maintained its yield curve control and asset purchases.

“Just like their other central bank peers, the BOJ saw more downside in the economy. While the central bank did raise their GDP forecasts, they slashed their inflation outlooks all the way through 2020/2021, showing no signs of optimism of getting near their target of 2%. The BOJ is running out of options to defeat inflation and may rely on hoping oil prices remain stable,” wrote Edward Moya, market analyst at Oanda.

USD/JPY for Jan. 23, 2019.

USD/JPY for Jan. 23, 2019.

One U.S. dollar last bought ¥109.66, up from ¥109.37 late Tuesday in New York.

The British pound , +0.7024% again vied for the crown of best major currency performer of the session, breaking above the $1.30 threshold for the first time since November on Wednesday. Sterling last fetched $1.3038, up from $1.2955.

While the Brexit gridlock continues ahead of next week’s vote on Prime Minister Theresa May’s alternative deal, market expectations of an extension of article 50 — the treaty article that allows the U.K. to leave the European Union within two years of triggering it — and a receding risk of a no-deal Brexit continue to rise.

Former Chancellor of the Exchequer George Osborne — a remainer — told the BBC that he believed a Brexit delay was most likely, while current U.K. trade secretary Liam Fox — a leaver — said that delaying Brexit would be worse than getting no deal.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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