Dollar stalls on trade war fears

Trump’s talk with Merkel could worsen tensions

The dollar stalled on Wednesday as global trade tensions remained elevated, with US President Donald Trump discussing joining forces with Germany to counter China’s economic practices.

The dollar index, which measures the greenback versus a group of six major currencies, dipped 0.1 percent to 89.291.

It had gained about 0.34 percent overnight, pulling away from a fiveweek low of 88.942.

The dollar recovered slightly on hopes that negotiations between the US and China would produce a compromise and avoid a full-blown trade war.

But the White House said that Trump had discussed trade practices with China in calls on Tuesday with French President Emmanuel Macron and German Chancellor Angela Merkel, which could lead to an escalation of trade tensions.

The US currency was 0.2 percent higher at 105.530 yen. It had been pushed down from a high near 106.000 overnight after a slide in US stocks and Treasury yields, but as fears of a global trade war faded, it rebounded from the 16-month low of 104.560 yen set on Monday.

“The dollar lost some traction as equity markets sank following the latest media report on US trade policy,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

He was referring to a Bloomberg report stating that the Trump administration was considering using a law reserved for national emergencies in a crackdown on some Chinese investments.

“The threat of all-out risk avoidance caused by trade concerns has eased, but some ‘risk off’ moves are likely to keep impacting currencies as long as uncertainties remain,” Yamamoto said.

The euro was 0.15 percent higher at $1.2419 after losing 0.3 percent overnight on soft euro zone economic data and dovish-sounding comments from Erkki Liikanen, a member of the European Central Bank’s governing council.