The dollar and the yen found a reason for growth, it turned out to be the arrest of top managers of the Chinese technology giant Huawei in Canada. This caused new concerns about the trade war between the United States and China.
Just a day ago, the dollar was under pressure because of concerns about a possible recession in the US, but the arrest of Huawei's chief financial officer raised demand for the dollar, as doubts arose regarding the recent truce between Presidents Donald Trump and Xi Jinping. The arrest is associated with violations of US sanctions. Nowadays, political conflicts can jeopardize the success of trade negotiations. In such a situation, interest in riskier assets falls, and investors return to a safe haven. While the situation with the arrest will develop, safe currencies will grow against the background of high demand.
The dollar and the yen have already risen in price and the ascent will probably continue because at the weekend there will be no new information on the arrest of the financial director of a Chinese company. In turn, the abandonment of risky assets puts pressure on the Chinese yuan and the Australian dollar, which are most vulnerable to the escalation of the trade conflict. The only thing holding back the dollar as signs of a recession and the Fed's signals that the regulator may slow down the pace of interest rate hikes. This pressure will continue at least until the Fed meeting this month when the market sees the Fed position. I think that the recent reaction to the inversion of the US yield curve looks a bit hysterical but the dollar still needs the Fed's aggressive position.
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