Forex- Better U.S. Yields Slightly Lift Dollar Amid Trade War Threat

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© Reuters. The dollar gained slightly on Wednesday morning trade in Asia© Reuters. The dollar gained slightly on Wednesday morning trade in Asia

Investing.com- The dollar gained slightly on Wednesday morning trade in Asia as yields on U.S. treasures bounced off lows but concerns lingered over a U.S.- China trade war that is heating up and hindering the recovery of the greenback.

The U.S. dollar index, which tracks the greenback against a basket of currencies, was up 0.11% to 94.75 at 11:55PM ET (3:55GMT).

The USD/JPY pair climbed 0.1% to 110.14. It fell to 109.55 on Tuesday as the yen strengthened after U.S. president Donald Trump stated that he had asked U.S. trade representatives to come up with a new list of Chinese goods that may potentially be targeted by additional tariffs.

The yen is a safe-haven currency. Demand for the yen increases in times of political tension and market turmoil.

The market has gone into risk-off mode after the announcement of the possible new 10 percent tariffs on $200 billion Chinese goods and an angry reply from Beijing saying that “the United States has initiated a trade war and violated market regulations and is harming the interests of not just the people of China and the U.S., but of the world.”

“The threat of a trade conflict is a theme that could eventually override tax cut-induced benefits the U.S. economy is experiencing at the moment,” said Shin Kadota, senior strategist at Barclays (LON:BARC) in Tokyo.

The AUD/USD pair hit 0.7386, up 0.14%, after dipping to a 13-month low of $0.7347 on Tuesday. The Aussie dollar is considered sensitive to shifts in sentiment towards China.

Elsewhere, The USD/CNY pair was down 0.11% to 6.4777The People’s Bank of China (PBOC) set the yuan reference rate at 6.4586 versus Tuesday’s fix of 6.4235.

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