Dollar recovers from Trump impeachment damage, trade tensions hit yuan, Aussie

• The launch of a formal impeachment inquiry against US President Donald Trump while renewed global trade tensions weighed on the Chinese yuan and Australian dollar.
• The announcement that the House of Representatives would initiate a formal impeachment inquiry and disappointing consumer confidence data also weighed on the greenback.

LONDON: The dollar recovered on Wednesday after being hit a day earlier by the launch of a formal impeachment inquiry against US President Donald Trump while renewed global trade tensions weighed on the Chinese yuan and Australian dollar.

The US currency dropped on Tuesday after the announcement that the House of Representatives would initiate a formal impeachment inquiry and disappointing consumer confidence data also weighed on the greenback.

But the world's most liquid currency rebounded on Wednesday.

Adam Cole, a currency analyst at RBC Capital Markets, said the immediate reaction to sell the dollar was questionable.

"For a couple of reasons it's not a sell risk or sell dollar story," he said, pointing to the very small chance that Trump would be impeached, and his view that if the president left office it would not necessarily be positive for risky assets.

Some market players, however, said more domestic instability would consume Trump's political capital, making it harder for him to compromise with China on trade or boost spending ahead of a presidential election next year.

"Increasing US political uncertainty may dampen the outlook further, as it reduces the already low probability of the US economy benefitting from a pre-election fiscal impulse," Morgan Stanley analysts said in a note.

The dollar index climbed 0.2pc to 98.545.

Against the euro, it rose 0.2pc to $1.0999.