The dollar rose on Wednesday, even as investors focused on socking their money into bonds and gold - and to a lesser extent the yen and Swiss franc - with no end in sight in the trade tension between China and the United States.
Investor jitters intensified after the People's Daily newspaper, owned by China's ruling Communist Party, said Beijing was ready to use rare earths for leverage in its trade dispute with the United States. The wave of risk aversion sent sovereign bond yields tumbling across the world.
Benchmark U.S. Treasury yields fell to their lowest levels since September 2017 while New Zealand bond yields tumbled to a record low.
Fears about a trade war between the world's two biggest economies spurred selling in emerging market currencies such as the South African rand and Brazilian real and commodity-sensitive currencies including the Australian and New Zealand dollars.
"Most of the risk aversion that's coursing through markets is being felt by the Aussie, Kiwi and emerging markets," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "Big majors (are) little changed as key supports hold for now."
In late U.S. trading, an index that tracks the greenback against the euro, yen, sterling and three other currencies was 0.23% higher at 98.173, holding below a two-year high of 97.908 reached last week.
The Chinese yuan softened to 6.9130 per dollar, not far from 5-1/2 month lows. Benchmark 10-year Treasury yields fell to 2.219% earlier Wednesday, the lowest since September 2017, while yields on 10-year New Zealand government debt touched 1.730%, the lowest level since at least 1985.
Gold prices rose on the day's safe-haven move, gaining 0.2% to about $1,281 an ounce. The greenback was little changed against the yen and the Swiss franc at 109.65 yen and 1.0081 franc per dollar, respectively.
The euro was a tad weaker against the Japanese and Swiss currencies at 122.075 yen and 1.1227 franc, respectively.
"We are not going to get out of this choppying trading," said Ellis Phifer, senior market strategist at Raymond James in Memphis, Tennessee.
Major central banks have not signaled an imminent policy easing to counter business slowdown stemming from the Sino-U.S. trade conflict. The Bank of Canada on Wednesday left interest rates unchanged at 1.75% on expectations growth has picked up in the second quarter following a deceleration in the previous quarter. It did acknowledge increasing risks from global trade tension.
The Canadian dollar reached a five-month low of C$1.3547 after the BOC rate decision. Still, traders reckoned policy-makers would relent. Interest rate futures implied they believe the U.S. Federal Reserve would lower key lending rates by year-end.