August 20, 2019 / 4:45 PM / 4 months ago

FOREX-Dollar slips as U.S. yields slide again

    * Investors brace for dovish Fed at Jackson Hole
    * U.S. yield curve steeper, but may invert again
    * Pound plunges vs euro, dollar
    * Euro flat as markets focus on Italy
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Adds news on Italian prime minister's resignation, new analyst comments, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 20 (Reuters) - The dollar traded lower on Tuesday, in line with the drop in Treasury
yields, as investors braced for a potentially dovish Federal Reserve at a Jackson Hole, Wyoming, gathering
later this week, with many expecting an announcement of some measure that would ease U.S. recession
concerns.
    "Market expectations for Jackson Hole and the central banking community in aggregate are extremely
dovish," said Brad Bechtel, managing director at Jefferies in New York. "The U.S. market is pricing a
tremendous amount of easing now, along with many other markets around the world."
    Risk aversion crept into the market, a day after investors cheered the prospect of new stimulus
measures from global central banks to shore up their struggling economies.
    Markets also cautiously awaited Fed Chairman Jerome Powell's speech on Friday in Jackson Hole. 
    "We think a long yen exposure makes sense ahead of the Fed's Jackson Hole event," said Scotiabank in a
research note."If Fed Chairman Powell sounds dovish, U.S. yields and the U.S. dollar should fall; if he
sounds more hawkish, safe havens should rally."
    That said, market sentiment was not as distressing as that of last week, when the U.S. bond yield
curve inverted, a sign that many investors say presages a recession.
    The curve of 2-year and 10-year Treasury yields, however, remained steeper on Tuesday,
but could invert again based on past cycles.
    In midday trading, the dollar fell 0.3% against the yen to 106.34 yen and was down 0.3% versus
the Swiss franc at 0.9792 franc.
    The dollar index was down 0.1% at 98.255 after earlier rising to a 2-1/2-week high of 98.40. It
reached its 2019 high of 98.932 at the beginning of the month. 
    The euro rose 0.2% against the dollar to $1.1093 after Italy's prime minister announced his
resignation on Tuesday even as he made a blistering attack on his own interior minister, Matteo Salvini,
accusing him of sinking the ruling coalition and endangering the economy for personal and political gain.

    George Vessey, market analyst, at Western Union Business Solutions, said growing economic and
political risk in the euro zone have added to the euro's downside risks, leaving it vulnerable to hitting
new lows for the year. In early August, the euro had fallen to nearly two-year troughs.
    Elsewhere, the pound was down 0.1% both against the dollar and the euro, last at $1.2088 and
at 91.25 pence against the  euro.
    British Prime Minister Boris Johnson made new waves by writing to European Council President Donald
Tusk on Monday to propose replacing the Irish border backstop with a commitment to put in place
alternative arrangements by the end of a post-Brexit transition period.
    
    ========================================================
    Currency bid prices at 12:21PM (1621 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1094        $1.1076     +0.16%         -3.27%      +1.1096     +1.1067
 Dollar/Yen       JPY=        106.3400       106.6200    -0.26%         -3.56%      +106.6800   +106.1900
 Euro/Yen         EURJPY=     117.98         118.11      -0.11%         -6.53%      +118.2600   +117.5900
 Dollar/Swiss     CHF=        0.9787         0.9814      -0.28%         -0.28%      +0.9818     +0.9787
 Sterling/Dollar  GBP=        1.2157         1.2125      +0.26%         -4.70%      +1.2181     +1.2065
 Dollar/Canadian  CAD=        1.3324         1.3323      +0.01%         -2.30%      +1.3344     +1.3308
 Australian/Doll  AUD=        0.6778         0.6762      +0.24%         -3.84%      +0.6795     +0.6755
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0858         1.0875      -0.16%         -3.52%      +1.0881     +1.0846
 Euro/Sterling    EURGBP=     0.9125         0.9133      -0.09%         +1.57%      +0.9183     +0.9103
 NZ               NZD=        0.6415         0.6409      +0.09%         -4.50%      +0.6429     +0.6404
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.9955         8.9755      +0.22%         +4.13%      +9.0212     +8.9701
 Euro/Norway      EURNOK=     9.9803         9.9465      +0.34%         +0.75%      +9.9941     +9.9420
 Dollar/Sweden    SEK=        9.6936         9.6849      +0.26%         +8.14%      +9.7328     +9.6776
 Euro/Sweden      EURSEK=     10.7578        10.7297     +0.26%         +4.81%      +10.7791    +10.7230
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; additional reporting by Olga Kotaga in London; editing by
Jonathan Oatis)
  
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