rewrite this title and make it good for SEODollar bounces on rise in yields as trade war roils markets

By Rae Wee

SINGAPORE (Reuters) – The dollar rebounded slightly on Thursday thanks to a rise in U.S. Treasury yields, though currencies traded in tight ranges as investors struggled to determine the impact of an escalating global trade war on U.S. inflation and growth.

U.S. President Donald Trump on Wednesday threatened further tariffs on European Union goods, as major U.S. trading partners said they would retaliate for trade barriers already erected by him.

A rise in global trade tensions and worries over U.S. recession risks have rattled global markets and sparked huge volatility in the foreign exchange market, as traders seesaw between relief and angst over Trump’s whipsawing policy changes.

Markets were a tad calmer in the early Asian session on Thursday as investors got a break from the flurry of headlines about U.S. trade policy.

The dollar rose 0.05% against the yen to 148.31, recovering some of its losses from earlier in the week when it fell to a five-month low against the Japanese currency, as fears of an economic downturn in the U.S. sparked a rush to the Japanese currency as a safe haven.

The Swiss franc similarly edged away from Monday’s three-month peak and last stood at 0.8817 per dollar.

Data released on Wednesday showed U.S. inflation rose slightly less than expected in February, but the relief it offered could be temporary as the data did not fully capture the cascade of Trump’s tariffs.

“What is more uncertain is the outlook for future inflation and the state of U.S. economic activity, thanks largely to the unpredictability of U.S. trade policy,” said James Reilly, senior markets economist at Capital Economics.

“It is these issues driving markets, and (the) report gave little fresh insight into either of those.”

But U.S. Treasury yields pushed higher as traders wagered on a pick-up in inflation down the line, with the benchmark 10-year yield last steady near a one-week top at 4.3047%.

The two-year yield was little changed at 3.9866%.

That kept the dollar supported and knocked the euro away from Tuesday’s five-month top, with the single currency last fetching $1.0890.

Sterling ticked up 0.06% to $1.2968, while the dollar index edged away from Tuesday’s five-month low and firmed at 103.57.

The Canadian dollar was little changed at C$1.4372.

The Bank of Canada on Wednesday trimmed its key policy rate by 25 basis points and raised concerns about inflationary pressures and weaker growth stemming from trade uncertainty and Trump’s tariffs.

“Tariffs pose inflation pressures to the world economy, which would be a nightmare for central banks… central bankers are just being more cautious and keeping an open mind to what’s to come,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

“Even though central banks can cut interest rates to offset the negative impact on growth, inflation concerns might ultimately limit what they can do on the monetary policy front.”

Elsewhere, the Australian dollar rose 0.07% to $0.6326, while the New Zealand dollar edged 0.13% higher to $0.5738.

(Reporting by Rae Wee; Editing by Jamie Freed)