Mubasher: US dollar fell on Tuesday as US Treasury yields dropped to three-month lows, which indicated for some traders that the Federal Reserve would slow the pace of rate hikes.

By 8: 37 am GMT, the US dollar index, a tracker of the greenback against six major currencies, dropped 0.42% to 96.6280.

The US 10-year Treasury yields declined to 2.94% on Tuesday, reaching their lowest level since mid-September, while the yield gap between the US 2-year and 10-year bonds tightened to its smallest since July 2007.

The yield curve has flattened as continuing interest rate hikes pushed short-dated yields higher, while long-dated bond yields were bolstered by cooling inflation and slowing global growth.

“Falling US yields are a negative for the dollar, especially versus the major currencies,” NAB senior currency strategist Rodrigo Catril told Thomson Reuters.

The weakness in the greenback also came on the back of 90-day ceasefire in the trade conflict between the US and China, which boosted investor appetite for riskier currencies against the safe-haven dollar.

Currencies such as the Chinese yuan (CNY) weakened in the middle of US-Sino trade disputes, while they are expected to trade stronger against the dollar in the coming weeks as investor sentiment improves.

By 8:38 am GMT, the US dollar dipped 0.61% against the yuan to $0.1462.

Elsewhere, the greenback declined 0.35% against the sterling pound (GBP) to $1.2763, while it went down 0.27% against the euro (EUR) to $1.1387.