FOREX-Yen buoyed by China jitters; sterling under water

By Wayne Cole
SYDNEY, Aug 12 (Reuters) - The dollar remained on the
defensive against the safe-haven yen on Monday as the Sino-U.S.
trade dispute looked set to drag on with no settlement in sight,
while holidays in Japan and Singapore made for very thin
trading.
Confusion still lingered after U.S. President Donald Trump
on Friday said he was not ready to make a deal with China and
even called a September round of trade talks into question.
Goldman Sachs over the weekend cut its forecast for U.S.
economic growth, warning that a trade deal was unlikely before
the 2020 presidential election and that the risks of a recession
were increasing. "Overall, we have increased our estimate of the growth
impact of the trade war," the bank said in a note.
All eyes will be on Chinese figures on retail sales and
industrial output due Wednesday to gauge the impact of the
long-running tussle on domestic activity.
Beijing has allowed its yuan to ease in recent weeks as an
offset to the tariffs, pressuring emerging market currencies
across Asia and boosting the yen.
The dollar edged up to 7.1034 yuan in offshore trade CNH=
early on Monday as investors waited to see where the Chinese
central bank would chose to fix it CNY=PBOC .
The dollar went the other way against the yen, easing to
105.40 JPY= after hitting a seven-month low around 105.25 on
Friday. The dollar was hardly alone, with the euro down at
118.16 yen EURJPY= and near its lowest since April 2017.
Likewise, sterling had sunk to depths not visited since
2016 at 126.69 yen GBPJPY= having shed over eight yen in
little more than two weeks.
The pound struck a two-year trough on the dollar on Friday
after data showed the UK economy unexpectedly contracted in the
second quarter, only adding to the bearishness over Brexit and
the chance of a no-deal exit. GBP/
Sterling was last at $1.2020 GBP= and eyeing support at
$1.1979, which marks a low from January 2017.
The Telegraph reported Labour MPs had been told to cancel
all travel in early September in anticipation of Jeremy Corbyn
tabling a motion of no confidence in the government. The euro was steady on the dollar at $1.1200 EUR= , bound
between resistance at $1.1249 and support at $1.1175.
Politics remained a drag with the prospect of snap elections
in Italy up in the air as opposition built to League chief
Matteo Salvini's plans for a vote. Another hurdle will be Germany's gross domestic product
figures on Wednesday where a contraction is a real risk given a
steep drop in factory output in June.