FOREX-Dollar soars versus yen after U.S. makes trade concessions

(New throughout, recasts; changes dateline, previous LONDON)
By Kate Duguid
NEW YORK, Aug 13 (Reuters) - The U.S. dollar took off on
Tuesday morning, clobbering the Japanese yen, after the Trump
administration said it would delay 10% tariffs on some Chinese
products scheduled to begin next month, a significant concession
in the trade conflict between Washington and Beijing.
The U.S. Trade Representative said it would delay tariffs on
laptops and cellphones, among other products, set to be imposed
in September. The U.S. dollar rose 1.49% to 106.85 Japanese yen JPY= per
dollar. The yen is a safe-haven asset which benefits in moments
of geopolitical uncertainty and during economic downturns. The
U.S.-China trade war had begun to affect economic growth in the
United States and raise fears that the conflict could lead to a
recession.
Other safe havens like Treasury bonds also saw prices fall
as investors moved money into riskier assets. The dollar index
.DXY was 0.38% higher at 97.749, and the offshore Chinese yuan
CNH= was 1.38% stronger at 7.0050.
The news had a modest effect on interest rate forecasts for
2019. Two to three cuts have been priced in by the end of the
year, though on Tuesday morning expectations of two rate cuts
increased to 47.9% from 45.7% a day prior, according to CME
Group's FedWatch tool.
Still, some analysts cautioned a moderate response. "The
fact is that we have seen this film before, and it could be
naive to think so much on the back of this headline," said Naeem
Aslam, chief market analyst at ThinkMarkets in London.
The U.S. dollar was also buoyed on Tuesday after the United
States reported that consumer prices in July increased, though
the easing of trade tensions could tamp down further
inflationary pressures.
The Labor Department on Tuesday reported that the consumer
price index increased 0.3% last month, lifted by gains in the
cost of energy products and a range of other goods. The CPI had
edged up 0.1% for two straight months. In the 12 months through
July, the CPI increased 1.8% after advancing 1.6% in June.
Economists polled by Reuters had forecast the CPI would
accelerate 0.3% in July and rise 1.7% on a year-on-year basis.
Financial markets have fully priced in an interest rate cut
in September. Expectations that rates will be cut by 25 basis
points rose to 92.7% from 84.6% a day prior as fewer traders bet
on a more dramatic 50-basis-point cut next month.