Investing.com - The dollar rebounded from five-week lows against a currency basket on Tuesday, sending the euro and the pound to the day’s lows after fears of a trade war between the U.S. and China subsided.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, climbed 0.33% to 88.92 by 05:44 AM ET (09:44 GMT), from an overnight low of 88.57, which was the weakest since mid-February.
Fears over the prospect of an all-out trade war between the U.S. and China eased following reports on Monday that the two sides were negotiating to improve U.S. access to Chinese markets.
Reports of talks eased concerns that trade tensions between the world’s two largest economies could escalate out of control and whetted investor appetite for the dollar.
The traditional safe haven yen was lower against the dollar, with USD/JPY up 0.15% to 105.56, extending its rebound from Monday’s 16-month low of 104.62.
The yen showed little reaction after a former Japanese finance ministry official testified in parliament on Tuesday that Prime Minister Shinzo Abe, his wife or Finance Minister Taro Aso did not give instructions to change documents about a land deal at the center of a suspected cronyism scandal.
The controversy over the land deal has seen Abe’s popularity plunge, raising doubts over his ability to continue pursuing his Abenomics policies, which include aggressive monetary easing.
The euro reversed early gains against the dollar, with EUR/USD down 0.17% to 1.2422 after rising to a five-week high of 1.2477 overnight.
In the euro zone, data on Tuesday showed that business confidence fell more than expected in March.
The European Commission’s index for the euro zone fell to 112.6 in March from 114.2 in the previous month, against forecasts of 113.4 as optimism declined in the manufacturing, service and retail sectors.
The pound was the worst performer against the major currencies, with GBP/USD down 0.56% to 1.4148.
Sterling was also weaker against the euro, with EUR/GBP advancing 0.38% to 0.8779.