By Peter Nurse
Investing.com – The US dollar gains positions at the start of trading in Europe on Thursday, stabilizing after earlier losses, as mounting recession concerns weigh on US Treasury yields.
At 9:10 AM ET, the , which tracks this currency against a basket of six other majors, is slightly higher at 104.010, having fallen sharply since hitting a two-decade high on June 15. at 105.79, when the Federal Reserve raised rates by 75 basis points.
The dollar has fallen from those highs as markets grow increasingly concerned that the Federal Reserve’s attempt to curb historically high inflation with aggressive monetary tightening could trigger a recession.
Fed Chairman Jerome Powell added to these concerns on the first day of his two-day appearance before Congress, stating that while not what central bank policymakers intended, the recession is “certainly a possibility” while trying to control prices.
Those concerns have pushed US Treasury yields to a near two-week low, before rebounding slightly at the start of the European trading day.
Powell will continue his appearance this Thursday, and data from the United States will be published.
“We have another day of Powell’s appearances on Capitol Hill this afternoon, so prepare for more swings throughout the day and parsing his every word,” warns OANDA analyst Jeffrey Halley.
The pair is down 0.2% to 1.0549, the is down 0.4% to 1.2214, after data showed the UK Government borrowed more than expected in May following a 70% increase in interest payments for servicing the national debt, while the very risk-sensitive 0.6% is left to the level of 0.6887.
Furthermore, the pair was down 0.4% at 135.71, retreating from Wednesday’s 24-year high of 136.71, as the yen benefited from a narrowing gap between debt yields Japanese government bonds and US Treasury bonds.
Statements by Takehiko Nakao, former head of foreign exchange policy at the Finance Ministry, also weighed on the pair, stating that the possibility of Japan intervening directly in currency markets to stem the yen’s decline cannot be ruled out.