During Asian trading the dollar briefly extended gains and the yen fell as Japanese stocks erased early losses to trade higher and as US Treasury yields rose slightly. The move quickly faded, however, partly reflecting thin treading due to the summer holiday season. Against a basket of six major currencies, the dollar index edged higher to 98.218. Since hitting a three-week low on Aug. 9, the dollar index has recovered, rising around 1%.
Data showing American consumers continued to splurge in July came as a relief to investors after the US bond market sounded alarms of a recession. The dollar was little changed at 106.18 yen in Asian trading after rising 0.2% on Thursday. For the week, the greenback was up 0.5% against the Japanese currency, its biggest gain since the week ended July 26.
The dollar rose 0.3% to 0.9787 Swiss franc, on course for a 0.6% weekly gain. A day after inverting, the US yield curve steepened a little. Curve inversion, which occurs when long-term yields dip below short-term yields. Sterling was marginally higher, on course for its first weekly gain since mid-July, as positive data on retail sales and consumer pries showed the British economy is in better shape than some investors had feared.
The pound traded at $1.2088, close to a one-week high of $1.2150. However, sterling bears are still on the ascendancy given the risk that Prime Minister Boris Johnson will take Britain out of the European Union without transitional trade agreements, potentially causing short-term economic turmoil. Yet, the fragile calm in markets is unlikely to last, traders said. This week's inversion in the US Treasury yield curve, which has historically preceded several past US recessions, has stoked fresh worries about the economic impact of the Sino-US trade war.
China on Thursday vowed to counter the latest US tariffs on $300 billion of Chinese goods, but US President Donald Trump said any pact would have to be on America's terms, suggesting a resolution to the trade war remains elusive. Trump, who is seeking re-election in 2020 and had made the economy and his tough stance on China a key part of his 2016 campaign for the White House, said any agreement must meet US demands. More protests are also expected in Hong Kong over the weekend, which could become a new geopolitical flashpoint and further complicate the US-China trade war.