Dollar Falls To 2-week Low Vs Yen On Renewed Trade Tensions

Published date: .


Jun 25, 2018, 09.18 AM IST

The dollar index against a basket of six major currencies stood at 94.559 having retreated from 95.529.



fell to a two-week low against the yen on Monday as a latest flare-up in global trade concerns dented investor risk appetites and drove down US yields.

The greenback was down 0.4 per cent at 109.54 yen after dropping to 109.45, its weakest since June 11.

Investors steered from risk, with Asian equities in retreat and Treasury yields declining, after the Wall Street Journal reported the US Treasury Department is crafting rules that would block firms with at least 25 per cent Chinese ownership from buying US companies involved in "industrially significant technology".

The report added to the sense of caution felt after US President Donald Trump on Friday threatened to impose a 20 per cent tariff on all cars imported from the European Union. The EU responded by saying it will have no choice but to retaliate to such a move.

"The dollar was already looking shaky against the yen in wake of the US spat with the EU. Any positive breakthrough in trade talks would prompt bargain hunting of the dollar, but that is simply not happening," said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.

"Even if the batch of US data due this week prove to be strong, the dollar may not draw much support as long as trade worries are not cleared."

This week's US indicators include housing-related data on Monday, the Conference Board's consumer confidence index on Tuesday, durable goods orders on Wednesday and personal consumption expenditures (PCE) numbers on Friday.

The dollar index against a basket of six major currencies stood at 94.559 having retreated from 95.529, its highest level since July 2017, scaled early on Friday.

The greenback had climbed to the 11-month peak as higher US yields underlined the divergence in monetary policies between the United States and Europe.

The dollar, however, began to sag towards the end of last week as US yields lost their lift amid heightened trade tensions between Washington and the European Union. The 10-year Treasury note yield fell to a one-week low of 2.871 per cent on Monday.

The euro was steady at $1.1654 after gaining about 0.5 per cent on Friday. The single currency was lifted after Friday's upbeat German and French business activity data and fresh assurances by Italian politicians that their nation would not leave the single currency.

"The euro is on a technical bounce but whether it can retain the uptrend depends on how the US-EU trade tensions pan out," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"The trade spat has helped drive down both US and German debt yields, and both the euro and dollar could lose out if tensions intensify," he said. "The yen could end up the winner in such a case by attracting safety bids."

Commodity-linked currencies dipped as a surge by crude oil prices ran out of steam amid the latest round of trade jitters.

Oil had rallied on Friday afterOpec agreed to an unexpectedly modest increase in production from next month after Saudi Arabia persuaded Iran to cooperate.

The Australian dollar was down 0.3 per cent at $0.7418 after gaining 0.85 per cent on Friday. The Aussie had fallen to a one-year low of $0.7394 last week, hurt by the Sino-US trade spat.

The Canadian dollar slipped 0.25 per cent to C$1.3295 per dollar after advancing 0.4 per cent on Friday. The loonie had brushed a one-year low of C$1.3384 last week, buffeted by volatility in crude oil prices.

The Turkish lira was up about 0.5 per cent at 4.64 per dollar, after jumping as much as 1.6 per cent earlier.

The lira had initially soared after Turkish president Tayyip Erdogan and his ruling AK Party claimed victory in presidential and parliamentary elections on Sunday, overcoming the biggest electoral challenge to their rule in a decade and a half.

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