Yen and yuan in focus as traders weigh Trump comments
The week kicked off with a focus on Asian currencies, as Japan’s yen jumped on Bank of Japan policy chatter and China said its yuan was only weakening due to market forces.
The U.S. dollar meanwhile was muted, combating a hangover from President Donald Trump’s comments late last week, in which he voiced his displeasure with Federal Reserve rate increases and called China and the European Union currency and interest rate manipulators, pushing the dollar lower.
The ICE U.S. Dollar Index DXY, +0.08% was marginally lower at 94.429, while the broader WSJ Dollar Index BUXX, -0.03% was 0.1% lower at 88.19. Over the weekend, U.S. Treasury Secretary Steven Mnuchin said Trump supported the Fed’s independence.
See: Trump rips Fed rate hikes, but investors expect Powell to stay the course
On Monday, Trump took aim at Iran, which also weighed on the buck. Trump tweeted an all-caps warning to Tehran.
“The anti-dollar flows were fanned by yet another Trump Twitter tantrum this time pertaining to Iran as the president went on an all caps tirade warning Iran not to threaten the U.S.,” wrote Boris Schlossberg, managing director of FX strategy at BK Asset Management. “After a small flurry of activity, prices essentially settled down to their current levels with little economic or political action to drive trade.”
Japan’s yen USDJPY, -0.19% is among the best performing G-10 currencies, with the dollar falling to ¥111.09, down from ¥111.44 late Friday in New York.
Check out: Japan’s yen has become the clearest ‘expression of the effect of a trade war’
The move came on the coattails of a Bank of Japan policy tweak which has led Japanese government bonds to sell off and yields to shoot higher in their biggest one-day move in two years. The central bank was considering ways to make its quantitative easing program more sustainable in the eye of stubbornly low inflation, according to a Reuters report.
Elsewhere, China’s yuan remains closely in focus, weakening some 0.3% against the U.S. Dollar on Monday. Earlier, Chinese authorities said its currency’s value was driven by market forces and not due to intentional devaluation. One dollar last fetched 6.7893 yuan in Beijing USDCNY, +0.2171% and 6.7978 in its offshore market USDCNH, +0.4204% which trades more freely.
In the year so far, the yuan has dropped 4.4% against the dollar, both onshore and offshore, according to FactSet data.
After months of sharp rhetoric, on-again off-again trade talks and import tariffs between the U.S. and China, market participants began to question whether the yuan’s slide versus the dollar was intentional. A weaker currency makes country’s products more competitive on the global market. Mnuchin said the Chinese currency was going to be reviewed in the Treasury’s semiannual currency manipulation report.
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