Japan’s yen and the U.S. dollar were stronger against their major rivals on Tuesday, as the escalating trade conflict between the world’s two biggest economies sent investors looking for safer assets.
Trade tensions between the U.S. and China were already heightened, when President Donald Trump threatened to slap new import levies on up to $400 billion of Chinese goods late Monday, on top of the $50 billion his administration has already detailed. China responded on Tuesday, saying Beijing will have no choice but to take comprehensive measures in response to the U.S.’s trade moves.
Don’t miss: China’s currency hits 5-month low as trade fight with U.S. intensifies
In the foreign exchange universe, this led investors to flee to haven currencies, which tend to provide both liquidity and relative stability in times of volatility.
“Investors are concerned about a full-blown trade war,” wrote Viash Sreemuntoo, corporate trader at XE.com. “Escalating trade actions and reactions [are] fueling a surge in the yen and this trend is likely to continue.”
The Japanese yen USDJPY, -0.56% was higher versus all of its major crosses, including the euro and British pound. The dollar bought ¥109.86, down from ¥110.55 late Monday in New York, marking a one-week low, while the euro fetched ¥127.11, compared with ¥128.50 on Monday.
The dollar fared well against most currencies other than the yen, helping lift the U.S. ICE Dollar Index DXY, +0.34% 0.4% to 95.129.
The Swiss franc USDCHF, +0.0603% also a haven currency, strengthened as well, although to a lesser degree. The dollar last bought 0.9947 francs, down 0.1%, while the euro traded at 1.1503 francs, down 0.6%.
The euro wasn’t only caught in the haven trade, but also weakened after European Central Bank President Mario Darghi said that “significant monetary policy accommodation is still needed” to support inflation, during a speech in Sintra, Portugal.
The euro EURUSD, -0.4388% dropped to $1.1561 from $1.1624 late Monday.