Investing.com - The U.S. dollar steadied on Wednesday, but remained on the defensive following the launch of an impeachment inquiry into President Donald Trump, which added to downside risks in markets.
The U.S. House of Representatives will launch a formal impeachment inquiry over whether Trump sought help from the Ukraine to smear former Vice President Joe Biden, a front-runner for the 2020 Democratic presidential nomination. Trump has denied the claims.
It is unlikely that the impeachment inquiry would lead to Trump's removal from office, but the development has added fresh uncertainty into financial markets.
"If an impeachment enquiry looks like ending his re-election chances in 2020, he may throw caution to the wind and harden his attitude to a China trade deal, increasing the chances of a global recession next year," said Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.
On Tuesday, speaking in the UN, Trump struck a harsher note on trade saying he would not accept a "bad deal" in U.S.-China trade negotiations.
China's top diplomat Wang Yi quickly hit back, saying Beijing would not be threatened on trade or allow interference in its affairs, including Hong Kong, while having no intention to "play the Game of Thrones on the world stage".
The dollar rose 0.3% to 107.36 yen by 3:08 AM ET (7:08 GMT), having slipped to a two-week low of 106.96 the previous day.
The safe-haven Swiss franc edged back to 0.9862 franc per dollar from near three-week high of 0.9845 to the dollar on Tuesday.
The euro, which was battered by weak euro zone economic data earlier this week, inched down 0.1% to 1.0996, closing in on Monday's low of 1.0966.
The U.S. dollar index, which measures the U.S. currency against six major currencies, was up 0.2% at 98.15.
Also weighing on the dollar was data showing that U.S. consumer confidence fell by the most in nine months in September, a potentially worrying signal for consumer spending, which has been driving the economy.
Meanwhile, the British pound was weaker, down 0.1% to 1.2465 after having risen sharply on Tuesday immediately following the Supreme Court’s ruling that a five week suspension of parliament in the run-up to Brexit was unlawful.
The New Zealand dollar edged up to 0.6325 after the Reserve Bank of New Zealand kept interest rates on hold, as widely expected.
--Reuters contributed to this report