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FOREX-Yen surges after Trump trade salvo wipes out dollar rally

ForexAug 02, 2019 03:00
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FOREX-Yen surges after Trump trade salvo wipes out dollar rally

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Trump say to impose more tariffs on China
* U.S.-China trade war could cause more market volatility
* Yen jumps versus Aussie, kiwi

By Stanley White
TOKYO, Aug 2 (Reuters) - The Japanese yen hit a
more-than-one month high against the dollar and multi-year peaks
against antipodean currencies on Friday after U.S. President
Donald Trump broke a truce in the Sino-U.S. trade war,
bolstering demand for safe-havens.
Trump said he would impose an additional 10% tariff on $300
billion worth of Chinese imports on Sept. 1 after U.S.
negotiators returned from trade talks in Shanghai, saying China
had failed to buy large quantities of U.S. agricultural products
as promised. China's offshore yuan slumped to the lowest in more than a
year as Trump's new levies would end a recent pause in a trade
war that has forced Chinese policymakers to unleash stimulus to
offset its slowing economy.
Trump's surprise announcement sent shockwaves through global
financial markets and wiped out the dollar's recent rally
against the yen, made after U.S. Federal Reserve Chairman Jerome
Powell indicated the central bank was not entering a prolonged
easing cycle.
An escalation in trade friction between the world's
two-largest economies threatens to bring further volatility to
stocks and bond yields, which could weigh on the dollar and
currencies from commodities exporters that trade with China.
"The yen could be bought further because of Trump's move
against China with tariffs," said Junichi Ishikawa, senior
foreign exchange strategist at IG Securities in Tokyo.
"It's important to watch the dollar because its break above
109 yen was triggered by a rise in Treasury yields, but after
Trump's comments yields are going in reverse."
Against the dollar, the yen JPY=EBS was little changed at
107.490, just below 107.105, which was the highest since June
26. On Thursday, the dollar slumped 1.3% against the yen, its
biggest daily decline since May 2017. The yen was also poised to
rise versus the South Korean won.
The offshore yuan CNH=D3 was trading at 6.9670 per dollar
after falling to the weakest since November 2018.
The dollar index .DXY was steady in Asia at 96.768 after
falling 0.15% on Thursday, its biggest daily decline in two
weeks.
The benchmark 10-year U.S. Treasury yield US10YT=RR
dropped to 1.878%, its lowest since November 2016 and the first
time it has fallen below the technically significant 2% level in
more than two years.
Traders will focus on how Chinese financial markets react to
Trump's latest salvo, but there are concerns that so-called
risk-off trades will weigh on commodity currencies and those of
smaller economies that rely on trade with China.
Against the Australian dollar, the yen AUDJPY= rose to
72.87, the highest since October 2011, before trading at 73.10.
Versus the New Zealand dollar, the yen NZDJPY= hit 70.26,
the highest since June 2016.
Bids for the yen against the South Korean won JPYKRW=R
were at the highest level since November 2016. Traders often
sell the won when U.S.-China trade tensions intensify, given
South Korea's close economic ties with China.

FOREX-Yen surges after Trump trade salvo wipes out dollar rally
 

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