NEW YORK (Reuters) - The dollar recovered from early weakness against the safe-haven yen to advance modestly on Thursday as better-than-expected U.S. retail sales data tempered concerns that the U.S. economy could be headed for a recession.
Fears over a recession had spiked on Wednesday, driving gains in the Japanese currency against the greenback, after the U.S. Treasury yield curve US2US10=TWEB inverted for the first time in 12 years.
However, the yen retreated on Thursday after data showed U.S. retail sales surged in July, helping assuage financial markets’ fears about the U.S. economy, which has been enjoying the longest expansion in the country’s history.
“With the rest of the world sliding into the abyss, the July retail sales figures show a resurgent U.S. consumer riding to the rescue once again,” Michael Pearce, senior U.S. economist at Capital Economics, said in a note.
U.S. retail sales rose in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, which could help ease financial markets’ nerves about the health of the U.S. economy.
The dollar was up 0.11% against the yen.
The dollar index .DXY, which tracks the greenback versus the euro, yen, sterling and three other currencies, was up 0.11% at 98.095, close to a two-week high.
Graphic: World FX rates in 2019 - here
The U.S. bond market continued to flash a caution sign with 30-year Treasury yields dipping to a record low below 2% and benchmark 10-year notes dropping to a three-year trough on Thursday.
The inversion of portions of the Treasury bond yield curve this week would “have to be sustained over a period of time” to be taken as a “bearish” signal for the U.S. economy, St. Louis Federal Reserve President James Bullard said on Thursday.
Elsewhere, Norway’s crown weakened after the country’s central bank, the Norges Bank, said its policy outlook was now more uncertain, raising doubts about whether it would raise rates later in 2019.
The crown slipped to a near 18-year low against the U.S. dollar.
The Australian dollar AUD=D3 was up 0.47% to $0.6779 after data showed the Australian economy had added a forecast-busting 41,100 new jobs in July.
However, as the China-U.S. trade war raises fears of a global recession, businesses run the risk of being caught in a self-fulfilling vicious cycle, a top Australian central banker warned on Thursday.
Meanwhile, sterling rose 0.42% against the dollar, helped by better-than-expected retail sales and news that Britain’s opposition Labour Party has begun its bid to bring down Prime Minister Boris Johnson and stop him from taking Britain out of the European Union without a deal.
Reporting by Saqib Iqbal Ahmed; Editing by Sandra Maler and Leslie Adler