The U.S. dollar was hovering near two year highs against a currency basket on Thursday as persistent concerns over global trade tensions prompted investors to seek refuge in safe haven assets.
With the trade spat between the U.S. and China showing no signs of easing concerns that global economic growth will be hit have loomed over financial markets in recent sessions, leading to rising risk aversion.
The U.S. dollar index was 98.132 by 03:17 AM ET (07:18 GMT), not far from a two-year high of 98.371 reached a week ago. The index is up more than 2% for the year.
"The outlook for global growth, and any drag from the festering trade dispute, remain key issues for markets," said Michael McCarthy, Sydney-based chief market strategist at CMC Markets.
"The data over the next twenty-four hours has potential to either confirm or dispel the gloom," he wrote in a note.
In the latest sign that the Sino-U.S. trade dispute is far from ending, Chinese Vice Foreign Minister Zhang Hanhui said on Thursday that provoking trade disputes is "naked economic terrorism", ramping up the rhetoric against the U.S.
It came a day after Chinese newspapers warned that Beijng could use rare earth exports to strike back at the U.S. after U.S. President Donald Trump said he was "not yet ready" to make a trade deal.
Investors were turning their attention to the second estimate of U.S. first-quarter growth, due out later in the day and the weekly report on jobless claims.
"As the United States isn't likely to fall into a recession anytime soon, there's a likelihood that risk sentiment may improve based on the economy's strength," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.
The dollar held mostly steady even after benchmark 10-year U.S. Treasury yields hit as low as 2.210% overnight, their lowest since the middle of September 2017.
The greenback's status as the world's reserve currency tends to attract safe haven bids in times of market turmoil and political tensions. The U.S. 10-year yield was last at 2.282%.
The dollar was also underpinned by weakness in the euro on fresh signs of political tensions between Italy and the European Union.
The European Commission wrote on Wednesday to the Italian government asking it to explain a deterioration in the country's public finances, setting the stage for a possible clash.
The single currency was last at 1.1124, recovering somewhat after falling 0.8% in three straight losing sessions.
The Australian dollar added 0.2% to 0.6930.
The dollar was higher against the yen at 109.81, about 0.5% above a more than three-month low of 109.02 touched on May 13.