* Aussie slumps vs dollar after weak third-quarter growth
* Yen claws back some of the previous session's losses vs dollar
* Graphic: World FX rates in 2018
By Daniel Leussink
TOKYO, Dec 5 (Reuters) - The dollar remained under pressure on
Wednesday after the U.S. bond market sent worrisome signs about
economic growth overnight, adding to fears that the Federal Reserve
could put its rate-hike cycle on hold.
The Australian dollar slumped against the greenback on
worse-than-expected quarterly economic growth, reversing the early
gain booked after China's Commerce Ministry said China and the United
States would proactively push forward trade negotiations in the coming
Investors remained nervous over an inversion of the yield curve
between three-year and five-year U.S. Treasury notes and between
two-year and five-year notes.
Analysts expected the two-year and 10-year yield curve, seen as
foreshadowing a U.S. recession, to follow suit.
"In the initial phase of the inversion of the yield curve
markets are worried about whether there'll be a recession," said
Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
"They react more aggressively to weak data than to strong
data," Yamamoto said. "I think the dollar can be in
correction-mode in a yield-curve inversion environment."
Against a basket of six key rivals , the dollar edged up to
97.020. It was 0.7 percent off a 17-month peak of 97.693 touched on
Interest rate hikes have sent short-dated yields higher, even as
slowing economic growth expectations have kept longer-dated yields down.
The dollar fell last week after Fed Chairman Jerome Powell said
last Wednesday that U.S. interest rates were nearing neutral levels,
which markets interpreted as signalling a slowdown in rate hikes.
Against the yen , the dollar rose 0.1 percent to 112.91 yen,
clawing back some of the previous session's losses, when it booked its
biggest one-day drop since July 20.
On Tuesday, the greenback shed 0.77 percent against the yen, which
acts as a safe haven in times of geopolitical and financial turmoil as
Japan is the world's biggest creditor nation.
Still, as long as U.S. two-year yields do not fall substantially,
the downside of the dollar against the yen remains limited, Mizuho's
"While the Fed officials' comments in the past days have been
taken as dovish and the pricing of the rate hikes next year has been
reduced, it doesn't change the direction of the U.S. two-year yield,
which is on the upside," he said.
The euro edged down to $1.1335 after slipping 0.1 percent
during the previous session.
The Australian dollar shed 0.4 percent to $0.7310 after
Australia reported positive but lower-than-expected third-quarter
The Aussie, often viewed as a barometer of Chinese growth, had
risen earlier in the session after China's Commerce Ministry said in a
statement that a Chinese trade and economics delegation had held a
successful meeting with the United States.
The Chinese ministry said the Chinese side would work to implement
specific issues agreed upon as quickly as possible, and was confident
they would be implemented.
U.S. stock and bond markets will be closed on Wednesday for a
national day of mourning for former U.S. President George H.W. Bush,
who died on Friday.
(Reporting by Daniel Leussink, editing by Eric Meijer)
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