Dollar drops as U.S. Treasury yield curve inversion sparks recession fears

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By Saqib Iqbal Ahmed

NEW YORK (Reuters) – The dollar fell broadly on Tuesday as U.S. Treasury yields slipped, feeding fears that the Federal Reserve could pause in its rate-hike cycle, while an inversion in part of the yield curve was taken as a red flag for a potential recession.

The dollar, which started the week on a weak footing as a thaw in trade tensions between Washington and Beijing sapped demand for the safe-haven greenback, extended its fall as investors fretted about an inversion of the short end of the U.S. yield curve in bond markets.

The curve between U.S. three-year and five-year Treasury notes and between two-year and five-year notes inverted on Monday – the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt.

Analysts expect the two-year, 10-year yield curve – seen as a predictor of a U.S. recession – to follow suit.

While interest rate hikes have sent short-dated yields higher, tepid inflation and slowing economic growth expectations have kept longer-dated yields pinned down.

Read more at : https://www.investing.com/news/forex-news/dollar-weakens-as-us-bond-yields-fall-trade-truce-supports-riskier-currencies-1709455

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