The Japanese yen rose in Asian trade on Tuesday against major rivals, resuming its gains against the dollar after a two-day hiatus and moving once more towards a six-month high, as investors shun risks amid mounting US-China trade tensions.
The yen is also underpinned by current weakness in US 10-year treasury yields, with markets now waiting for the Federal Reserve’s meeting minutes tomorrow to gather more clues on the future of US interest rates.
The Price
The USD/JPY fell 0.4% today to 147.25 yen per dollar, with a session-high at 148.12.
The yen lost 0.6% against the dollar yesterday on profit-taking away from a six-month high at 144.55, while US yields rebounded.
Trade Tensions
The White House quickly negated a report that alleges Trump is considering a 90-day hold on all tariffs except the China tariff, calling it “fake news”.
Trump escalated the tension with China and threatened an even bigger 50% tariff on Chinese imports if Beijing insisted on its retaliatory tariffs on US products.
Beijing vowed to “fight till the end” and asserted it won’t bow to US “blackmail”.
Otherwise, US business leaders started to talk publicly about the damage being done to the market because of the global trade war, with JPMorgan CEO Jamie Damon warning from inflation and slower growth.
Trade Negotiations
US tariffs on Japanese imports were more aggressive than expected and amounted to 24% on all Japanese imports.
Washington agreed to engage with Tokyo and negotiate a trade and mutually acceptable trade settlement.
Japanese Rates
As risks facing the Japanese economy mounted, traders cut the odds of another Bank of Japan interest rate hike this year to nearly zero.
US Yields
US 10-year treasury yields tumbled by 1.4% on Tuesday, resuming losses and approaching six-month lows once more, in turn pressuring the greenback.
Chicago Fed Governor Austin Goolsbey said that while corporations are concerned about tariffs, the central bank needs to look at hard data in its actual responses.
