The Japanese yen rose in Asian trade on Monday on track for the third profit in a row against the US dollar on haven demand amid mounting global and geopolitical tensions.
Renewed US-China tensions threaten to tank the initial trade agreement reached in Switzerland, with increasing animosity between Russia and the west after Ukraine executed a complex attack that targeted Russian air bases.
Recent Tokyo data showed increasing inflationary pressures on the Bank of Japan, which boosted the odds of a June interest rate hike by the Bank of Japan.
The Price
The USD/JPY price fell 0.55% to 143.32, with a session-high at 144.10.
The yen rose 0.1% on Friday against the greenback, following hot Tokyo inflation data.
Trade Tensions
China responded to US accusations of violating the Geneva trade agreement, by also accusing Washington of violating the deal, in a sign of deteriorating conditions between the two biggest economies in the world.
Trade tensions resumed after a short hiatus last month, when both sides signed a deal to suspend most tariffs for 90 days in Geneva.
Then the Trump administration put new limits on chip and chemical exports to China, and cancelled Chinese students’ visas, triggering the ire of Beijing.
China’s commerce ministry warned that such measures contradict the spirit of the Geneva deal, but conversely, Beijing maintained strict control over exports of rare earth minerals.
Geopolitical Tensions
In Europe, Ukraine executed an unprecedented military operation inside Russia, targeting five strategic air bases and damaging over 40 military airplanes, including Tu-95, Tu-22M, and A-50 planes.
Ukraine estimates the operation destroyed nearly 34% of Russian strategic bombers, with losses amounting to $7 billion.
Russia is expected to respond with heavy retaliatory strikes, likely targeting strategic Ukrainian infrastructure, and maybe even targeting the decision-making centers inside Kiev with long-range missiles.
Japanese Rates
Earlier data showed consumer prices in Tokyo rose 3.6% y/y in May, the fastest pace since January 2023, and up from 3.4% in April.
Following the data, the odds of a BOJ 0.25% interest rate hike in June rose from 35% to 45%.
Bank of Japan Deputy Governor Shinichi Uchida said the bank will continue to raise interest rates if the economy recovers from the negative impact of US tariffs, however he still cautioned that the economic outlook remains highly uncertain.
Now traders await more Japanese data on inflation, unemployment, and wages to gather additional clues.
