The Japanese yen rose to an eight-month high against the dollar on Wednesday and the Swiss franc gained as worries over flagging international growth sent investors to safe-haven currencies. Fears about the global economic slowdown are rising even as central banks adopt increasingly dovish policies. The Reserve Bank of New Zealand cut its official cash rate more than expected to a record low of 1% on Wednesday and flagged the possibility of using negative rates to stimulate the economy, sending its currency to 3-1/2 year lows.
The Reserve Bank of India and the Bank of Thailand also cut rates. "You've seen a couple of central banks ease policy today, some by more than expected, and you're still seeing a more cautious market backdrop," said Erik Nelson, a currency strategist at Wells Fargo in New York.
"I think there may still be some lingering concern over how much this easing will really support the global economy, or just maybe the idea of monetary policy impotence is on investors' minds here," Nelson said. The New Zealand dollar was last down 0.92% at $0.6463, bouncing off the session low of $0.6379.
The greenback fell 0.47% against the yen to 105.94 after earlier dropping as far as 105.51, the weakest since January 3. The dollar dropped 0.37% against the Swiss franc to 0.9727. Disappointing German data on Wednesday added to the economic malaise. German industrial output fell more than expected in June driven by weaker production of intermediate and capital goods.
The escalating US-China trade war is adding to economic headwinds and hurting business sentiment. Last week, US President Donald Trump said he would impose more tariffs on Chinese goods. On Monday, China responded by allowing its currency to weaken past 7 per dollar for the first time since 2008, and Washington labeled Beijing a currency manipulator.
The yuan weakened on Wednesday, but held above an 11-year low reached the previous session, before Beijing appeared to take steps to stabilize the currency. The dollar gained 0.39% against the offshore yuan to 7.0814. The dollar index against a basket of currencies dipped slightly as Treasury yields dropped, with 30-year yields approaching record lows. The index was last down 0.10% at 97.532.