(Reuters) The Japanese yen jumped to a session high against the dollar on Wednesday after the U.S. Treasury bond yield curve inverted for the first time since 2007 and investors, gripped by fear of a looming global recession, fled to the safety of perceived safe-haven assets.
“There is plenty of doom and gloom to spread across the globe,” said John Doyle, vice president for dealing and trading at Tempus Inc in Washington. The U.S. yield curve “is a major recession indicator. Germany, Italy and the UK are likely headed for a recession. Today’s Chinese data was shockingly bad.”
On Tuesday, the dollar gained dramatically against the yen after U.S. President Donald Trump backed off his Sept. 1 deadline for imposing 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods. The announcement came after renewed trade discussions between U.S. and Chinese officials.
Those gains were reversed overnight, however, as skepticism about the progress began to weigh.
“I thought yesterday’s risk-on move was going to be short-lived, which looks to be right,” said Doyle. “Reopening talks with China is a good step, but there has not been any real progress in months, so I think markets are starting to discount efforts by the U.S. or China to de-escalate because recent history has shown that little comes from it.”