The Dollar is struggling as the Fed looks to cut interest rates
The dollar traded near a one-week low against the yen on Thursday as declines in US Treasury yields boosted expectations that the Federal Reserve will cut interest rates later this month.
Government bonds are in the midst of a global rally that has pushed US Treasury yields to their lowest level in more than two and a half years and sent European yields to low levels amid increasing bets that major central banks will cut rates to support the global economy.
A fall in expectations for a quick solution to the US-China trade war has also hurt the morale of the dollar.
Investors were shifting their attention to US nonfarm payrolls on Friday, which economists expect to rise by 160,000 in June, from 75,000 in May.
The positive payroll data is unlikely to support the dollar as expectations of a cut in US interest rates are strong, given inflation and the fallout from the trade war.
“When US returns are low, you can not expect people to accumulate to buy the dollar,” said Junichi Ishikawa, chief foreign exchange strategist at IG Securities in Tokyo.
“Morale tends to test the downside of the dollar … There are expectations for a reduction in interest rates in Europe and Britain, so it may be easier for the dollar to move against the yen.”
The dollar changed slightly at 107.79 yen on Thursday, after hitting a one-week low of 107.54 yen on Wednesday.
The dollar has fallen 3.5% against the yen in the past three months amid growing signs that the Fed will cut interest rates at its July 30-31 meeting.
The US dollar index against a basket of six major currencies was only slightly changed at 96.35.
Global forex trading is likely to be limited on Thursday as US financial markets closed on public holidays.
The US administration said on Wednesday it would schedule a call with Chinese negotiators next week to resume talks between the two countries.
Expectations for a smooth solution to the dispute have dropped after Trump said any agreement should be somewhat tilted in favor of the United States.
The EUR traded near a two-week low of 1.1282.
The common currency has fallen since the nomination of Christine Lagarde, a member of the International Monetary Fund (IMF), seen as a political pigeon, as the next ECB president.
The pound traded at 1.2580, falling near a two-week low of $ 1.2557 on speculation that the Bank of England will abandon its preference for higher interest rates and swing to a dovish camp such as the trade war and uncertainty about Britain’s exit from the European Union.