The U.S. dollar climbed in Friday trading, as investors grappled with an inverted U.S. Treasury yield curve and another round of disappointing economic data in the eurozone region that put pressure on the euro.
The ICE U.S. Dollar Index DXY, +0.64% continued its climb after Thursday’s gains and rose 0.1% to 96.616. For the week, the gauge, which measures the greenback against six rivals, is flat. Notably, it fell to a six-week low on Wednesday, following the Federal Reserve’s dovish policy update.
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Elsewhere in U.S. assets, the spread between the 3-month Treasury yield TMUBMUSD03M, -0.54% and the 10-year yield TMUBMUSD10Y, -3.66% inverted for the first time since 2007, thanks to a rally in longer-dated bonds. U.S. stocks dropped as the yield curve inversion is seen as an early recession indicator.
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This wasn’t the only big fixed income move, as disappointing data led German 10-year bund yields TMBMKDE-10Y, -122.60% to fall below 0% earlier.
The euro EURUSD, -0.6329% was among the weakest performers against the dollar on Friday, last buying $1.1300, down from $1.1377, its lowest level in six days.
The eurozone manufacturing preliminary purchasing managers index fell to 51.3 in March, from 51.9 in February, a worse drop than expected. The manufacturing PMI slipped to 47.6, compared with 49.5 expected. A level below 50 denotes an economic contraction. The data stressed the slowing of the European economy, which the European Central Bank warned of in its latest update.
In Germany — the eurozone’s largest economy — the manufacturing PMI for March drifted to 44.7, worse than expected, and less than 47.6 before. The services PMI for the same period stood at 54.9, ever so slightly better than expected. A reading of less than 50 indicates a contraction in activity.
In that context, the Japanese yen USDJPY, -0.81% — a traditional haven — strengthened against both the dollar and the euro EURJPY, -1.43% The dollar was last down 0.7% at ¥110.06, while the euro slumped 1.3% to ¥124.36, it’s lowest level since early February and late January, respectively.
In the U.K., the British pound GBPUSD, +0.7706% was modestly stronger at $1.3209, compared with $1.3107 late Thursday.
The European Union Thursday agreed a conditional extension of the March 29 Brexit deadline. If the U.K. Parliament passes a version of Prime Minister Theresa May’s deal next week, the exit point will be delayed until May 22. If the vote fail — as it has three times before already — the U.K. has to clarify its next steps or leave without a deal by April 12.
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The dollar was also stronger across emerging markets, with the Turkish lira USDTRY, +5.4377% the worst performer. Investors in Turkey have grappled with Ankara’s economic problems since last summer, when a large-scale currency selloff haunted emerging markets. One dollar last bought 5.8164, up 6.4%.
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