Yen Surges as US-China Trade Tensions Batter Financial Markets
Japanese Yen, US-China Trade War – TALKING POINTS
- The Japanese Yen is starkly higher vs major G10-peers
- AUD, NZD, NOK, SEK all suffer amid risk aversion
- Crude oil prices, S&P 500 futures gap lower: what next?
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The Japanese Yen is starkly higher against its major counterparts as US-China trade war tensions flare up and are now echoing into Asia. Cycle-sensitive currencies like the Australian and New Zealand Dollars along with the Swedish Krona and Norwegian Krone are taking the brunt. Crude oil prices and S&P 500 futures gapped lower early into the session and will likely spill over into APAC equities.
Mind the Gap
On Friday, US President Donald Trump tweeted several additional tariff measures Washington will impose against China. The first is an increase of the $250 billion levy – set for October 1 – from 25% to 30%. The second tariff increase on $300 billion for September was raised up from 10% to 15%. Tensions between Beijing and Washington continue to flare up against the backdrop of a slowing global economy.
The effect of the ongoing trade war – and now another possible front across the Atlantic – has shredded market confidence, hampered cross-border investment and sapped upward inflationary pressure. Against the backdrop of slower global growth – in large part due to ongoing trade wars across the world – a premium has been placed on anti-risk assets as traders shift from chasing yields to preserving capital.
Looking ahead, market participants will be closely watching how China might retaliate. Beijing has a number of tools at its disposal, one of which is utilizing a rare-earth mineral ban that could severely disrupt the tech supply chain for major companies like Apple. Traders will also be closely watching the publication of GDP data out of the US and several core European economies. If the reports fall short, it could amplify risk aversion and strengthen the Yen.
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.