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Japanese Yen Still in Demand as Safe Havens Benefit From US-China Spat

Japanese Yen Still in Demand as Safe Havens Benefit From US-China Spat

Martin Essex, MSTA, Analyst

JPY price, news and analysis:

  • The US-China trade war is spreading to technology, with the US reportedly gunning for Chinese video surveillance company Hikvision as well as Huawei.
  • That is damaging sentiment in the markets and boosting demand for safe havens like the Japanese Yen.

Safe havens in demand

The Japanese Yen is continuing to climb as the US-China trade war shows signs of spreading, thereby reducing traders’ appetite for riskier assets and sending them into currencies like the Japanese Yen that are regarded as safe havens.

As the chart below shows, USDJPY is continuing to ease as a result.

USDJPY Price Chart, Hourly Timeframe (May 20 – May 23, 2019)

Latest USDJPY price chart.

Chart by IG (You can click on it for a larger image)

Using news and events to trade forex

Late Wednesday, the Reuters news agency reported that the US administration is considering Huawei-like sanctions on Chinese video surveillance firm Hikvision over the country's treatment of its Uighur Muslim minority, quotinga person briefed on the matter”.

This is outweighing news Thursday that the purchasing managers’ index (PMI) for Japan’s manufacturing sentiment fell from 50.2 in April to 49.6 in May – below the 50 mark that separates expansion from contraction.

Following some tentative signs that the downturn in Japan’s manufacturing sector had softened in April, flash data for May revealed these were short-lived, as output and export orders fell at stronger rates,” said Joe Hayes, economist at IHS Markit, which compiles the PMI surveys.

The re-escalation of US-China trade frictions has heightened concern among Japanese goods producers. Underlying growth weakness across much of Asia led to struggling exports, which fell at the sharpest rate in four months. Difficulties on the international front merely add to uncertainties domestically, with upcoming upper house elections in July, and the impending sales tax hike later this year. Subsequently, sentiment turned negative in May for the first time in six-and-a-half years, he added.

While this might be expected to weaken JPY, traders remain more concerned about the US-China spat, suggesting that further gains for the Yen could yet be in prospect.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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