Forex trends Monday: Safe-haven yen continues to strengthen amid market ructions

Ceramic cats at retailer DaisoCeramic cats at retailer Daiso

The safe-haven yen continued to strengthen last week amid a general risk-off tone across markets and amid concerns over U.S. politics, particularly the government shutdown.

Stephen Innes, head of Asia Pacific trading at OANDA, said on Monday that U.S. political concerns continued to overhang the market.

That included reports that U.S. President Trump had discussed firing Federal Reserve chief Jerome Powell after last week’s interest rate hike in a move that would be an unprecedented attack on the central bank’s independence. But various White House advisers have stepped up to reassure markets, with the incoming chief of staff, Mick Mulvaney, saying that Trump “now realizes he does not have the ability” to fire Powell.

Bloomberg has reported, citing its own analysis, that interest rate hikes cost the embattled president around US$5 million a year because he took out US$340 million in variable-rate loans from 2012-2015, an odd financial decision to make at a time when the Fed was already beginning to exit its ultra-loose policy.

In other news bending market sentiment, the U.S. government shutdown over the weekend after Trump refused to sign on to any budget deals unless his plan for wall on Mexico’s border is funded, with aids saying the standoff could continue into the new year.

“While I don’t think the shutdown risk is particularly dollar negative, in the yen’s case, solid arguments are being formed around being short USD/JPY on the back of Japanese lifer repatriation flow or increased hedging propensity,” Innes said in a note on Monday.

Other analysts noted that the U.S. government shutdown wasn’t as dire for the economy as previous budget battles.

“Only roughly one-quarter of government funding is at risk given prior spending and appropriations bills which is a fraction of the spending at risk going into other historical shutdowns. The general public will notice much less impact from this potential shutdown than some of the bigger ones in the past especially into the holiday season,” Scotiabank said in a note on Friday.

Currencies

The U.S. dollar index was at 96.86 at 8:26 A.M. SGT, after it climbed from as low as 96.27 to as high as 97.04 on Friday, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 2.783 percent at Friday’s close, off levels as high as 2.810 percent during the session, according to Tullett Prebon data. Japan’s markets were closed on Monday for a holiday.

The euro/dollar was at 1.1376 at 8:40 A.M. SGT after trading in a 1.1354 to 1.1474 range on Friday, according to DZHI data.

The British pound/dollar was at 1.2655 at 8:40 A.M. SGT after trading in a 1.2616 to 1.2698 range on Friday, according to DZHI data.

The dollar/yen was at 111.051 at 8:40 A.M. SGT after trading in a 110.91 to 111.459 range on Friday, compared with levels over 114 in late November according to DZHI data.

The dollar/yuan ended Friday at 6.9047 after trading in a 6.8800 to 6.9061 range during the session, according to DZHI data.

The dollar/Singapore dollar was at 1.3734 at 8:41 A.M. SGT after trading in a 1.3677 to 1.3753 range on Friday, according to DZHI data.

The dollar/Malaysian ringgit was at 4.1800 at 8:07 A.M. SGT after trading in a 4.1667 to 4.1856 range on Friday, according to DZHI data.

The dollar/Indonesian rupiah ended Friday at 14,550 after trading in a 14,449 to 14,555 range during the session, according to DZHI data.

 

 

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