* Euro, yen give up some recent gains vs dollar
* Trade tensions provide dollar some support
* Aussie plummets vs dollar after weak third-quarter growth
(Updates market action)
By Saqib Iqbal Ahmed
NEW YORK, Dec 5 (Reuters) - The dollar edged higher on Wednesday,
as the boost to the euro and the yen from worries about a possible
U.S. recession following an inversion in part of the U.S. Treasury
yield curve faded.
The greenback rose 0.35 percent against the Japanese yen and the
euro gave up all its early gains to trade about flat on the day.
The U.S. currency fell broadly earlier this week after a thaw in
trade tensions between Washington and Beijing sapped demand for the
safe-haven greenback. The currency also came under pressure after the
U.S. bond market sent worrisome signs about economic growth.
The difference between short-dated and long-dated U.S. Treasury
yields narrowed on Tuesday as the inversion of the yield curve spread
between more maturities, prompted by worries about a slowdown in U.S.
Still, lingering uncertainty regarding China and the United
States' ability to resolve their trade war provided some support to
"The ‘big’ dollar remains contained in a tight range against
G10 currency pairs," Dean Popplewell, vice president of market
analysis at OANDA in Toronto, said in a note.
"The U.S. dollar is caught in the cross currents of
safe-havens flows, as global stock markets remain volatile, and
investors’ realignment of Fed rate hike expectations in 2019," he
On Tuesday, the futures market implied traders expect the U.S.
central bank to raise interest rates at its next policy meeting, on
Dec. 18-19, but they have scaled back their expectations of two rate
hikes in 2019 to less than 10 percent, down from 59 percent a month
Tariff-driven price increases have spread more broadly through the
U.S. economy, though on balance inflation has risen at a modest pace
in most parts of the country, the Federal Reserve said on Wednesday in
its latest report on the economy.
The euro, which initially rose following a Reuters report that
European Central Bank policymakers are exploring ways to withdraw
stimulus in 2019, soon gave up those gains.
"We are on the side that thinks dollar is up for some losses
as others recover, but without the fundamentals being there, like GDP
and PMI expanding consistently, there is not clear end in sight for
dollar dominance," said Juan Perez, senior currency trader with
Tempus Inc in Washington.
Businesses across Europe hit the brakes last month as a
manufacturing slowdown in the euro zone spread to its dominant service
industry, while Brexit uncertainty hammered British companies, surveys
The Australian dollar slumped 0.97 percent against the
greenback as disappointing economic data further dimmed the chance of
a rise in rates.
The Aussie, often viewed as a barometer of Chinese growth, had
risen early in the session after China's Commerce Ministry said that a
Chinese trade and economics delegation had held a successful meeting
with the United States.
Sterling reversed early losses on a more positive outlook over
Brexit, overcoming data showing a shock slide in Britain's services
sector and suggesting the economy would barely grow in the last
quarter of 2018.
The Canadian dollar weakened to a one-and-a-half-year low against
its U.S. counterpart as investors slashed expectations for further
interest rate hikes from the Bank of Canada after a dovish interest
rate announcement from the central bank.
Graphic: World FX rates in 2018
(Reporting by Saqib Iqbal Ahmed; editing by Jonathan Oatis and Susan Thomas)
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