Talking Points:
- The Special Counsel investigating possible links between the Trump campaign and Russia has reportedlyissued its first subpoena.
- The Nikkei 225 slipped back while the Japanese Yen gained on this news
- Risk appetite looks set to struggle while the story plays out
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The Japanese Yen made gains on the US Dollar Friday, while the Nikkei 225 slipped, on a report that the first subpoena against the election campaign of US President Donald Trump had been issued pursuant to investigations of alleged collusion with Russia.
Special Counsel Robert Mueller’s team has ordered documents, according to a Wall Street Journal report citing a source familiar with the matter. The source also told the Journal that Trump’s campaign was surprised by the movehaving offered what it called full, voluntary cooperation with previous requests.
Although this is the first time that Trump’s campaign has been ordered to turn over information, a subpoena was previously served on his former campaign manager Paul Manafort and some associates. Manafort has already been charged with multiple counts. It was also announced in October that former Trump campaign advisor George Papadopoulos has pleaded guilty to lying to the Federal Bureau of Investigation about contacts with Russian officials.
Still, this latest clear sign that the investigation into Trump’s campaign isn’t going away anytime soon knocked risk appetite in Asia. The Nikkei 225 shed over 300 points after the news broke, with little obvious other reason for the slide. USD/JPY fell to 112.39 from around 113.00 before the story.
The Japanese Yen is perceived as a haven currency in times of market stress and seems to have fulfilled this role on Friday. USD/JPY was already retracing from recent peaks, a process now apparently accelerating. The pair needed to hold on around the 113.00 level to prevent a bearish “head and shoulders” pattern from appearing on the chart. Now that that level has given way, that pattern appears to be holding.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
