FX Rate News

The safe-haven yen remained in demand on Wednesday as investor caution prevailed due to fresh U.S.-Europe trade tensions and the International Monetary Fund’s downgrade of its global economic outlook.

Most major currencies were locked in narrow trading ranges as market participants largely kept to the sidelines ahead of a crucial Brexit summit meeting and a rate decision by the European Central Bank later in the day.

Broader sentiment in the market remained subdued as the flare-up between the United States and Europe added to other potential global flashpoints over trade, including Sino-U.S. negotiations.

“Now, there are battles on two fronts for the U.S.,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.

“If they’re going to be driving the global economy, it’ll be inherently more difficult if they’re fighting all these trade wars… on multiple fronts,” he said.

Against a basket of key rival currencies, the dollar drifted slightly higher to 97.036.

The dollar was a shade lower at 111.135 yen. From a more than three-week high of 111.825 brushed on Friday, the U.S. unit has fallen almost two-thirds of a percent.

Daiwa Securities senior currency strategist Yukio Ishizuki said the Japanese currency found further support ahead of an unprecedented 10-day holiday from late April to early May in Japan to mark the ascension of the new emperor, Crown Prince Naruhito.

“Above anything else, Japanese companies are conservatively managing operations. At the current stage, many of them will naturally be selling the dollar,” Ishizuki said.

“It’ll be easy for the yen to strengthen until the 10-day holiday is over,” he added.

The Australian dollar was up 0.1 percent at $0.7129, erasing an earlier loss after it found support on a speech from a senior Australian central bank official.

The Reserve Bank of Australia is keeping a close eye on how the divergence between a seemingly slowing economy and a strong labour market resolves itself to help determine where policy rates are headed, Deputy Governor Guy Debelle said.

On Monday, the U.S. Trade Representative proposed a list of European Unionproducts ranging from large commercial aircraft and parts to dairy products and wine on which to slap tariffs as retaliation for European aircraft subsidies.

The IMF on Tuesday slashed its global growth forecasts for 2019 to 3.3 percent, the slowest expansion since 2016 and from its earlier projection of 3.5 percent in January.

The global lender said a sharp downturn could require world leaders to coordinate stimulus measures.

Investors’ immediate focus on Wednesday will be on the ECB rate decision, a news conference by ECB President Mario Draghi and the release of minutes of the Federal Reserve’s last policy meeting.

Ahead of the Brexit summit meeting, the euro and sterling were largely unchanged, trading at $1.1258 and $1.3052, respectively.

European Union leaders will likely grant Prime Minister Theresa May a second delay to Britain’s exit from the EU but they could demand she accepts a much longer extension as France pushed for conditions to limit Britain’s ability to undermine the bloc.

The latest IMF forecasts, together with a pullback in oil prices, put pressure on commodity-linked currencies such as the Canadian dollar.

The loonie was a shade weaker at C$1.3334 after retreating overnight from its strongest level since March 21.

The euro sat near a one-month low hit last week as investors grew cautious about the outlook for the currency before a European Central Bank meeting this week.

Traders cut their long euro positions by their biggest margin in nine months last week, according to weekly positioning data as core European bond yields entered negative territory and as PMI data indicated a euro zone economy struggling to gain traction.

“We are seeing more euro scepticism in the market as expectations of an ECB rate hike has changed from the foreseeable future, with no firm timeline in sight,” said Ulrich Leuchtmann, a currency strategist at Commerzbank in London.

While the single currency was slightly higher on the day at $1.1228, it remained within striking distance of a one-month low of $1.1183 hit last week.

No policy changes are expected at this week’s ECB meeting, but the press conference afterwards will be in sharp focus amid talk of tiered rates to ease pressure on banks, global recession fears and a sense of alarm that pushed 10-year German bond yields below zero percent for the first time since 2016.

Risk appetite was broadly muted across the currency markets with the yenstronger and the Australian dollar weaker as concerns about the outlook for the global economy weighed on sentiment.

The dollar was also weighed down by softening bond yields. The greenback was 0.3 percent lower at 111.385 yen after briefly popping up to a three-week high of 111.825 on Friday following the U.S. jobs report.

The Australian dollar dipped 0.1 percent to $0.7095 in the wake of declining prices of commodities such as copper.

The pound held near a one-week low as France and the Netherlands expressed doubt about May’s plan to further delay Brexit. Sterling last traded at $1.3050 for a gain of 0.1 percent.

Optimism for a U.S.-China trade deal helped the dollar hit a three-week high against the yen on Friday, although moves in broader foreign exchange markets were limited as investors saw a lot of headlines but no conclusions out of the trade talks.

Xinhua reported that Chinese President Xi Jinping had said progress was being made in trade talks with Washington and called for an early conclusion of negotiations.

U.S. President Donald Trump said on Thursday a deal could be announced in about four weeks, but warned it would be difficult to let China trade with the United States if remaining issues were not resolved.

The dollar rose to a three-week high of 111.8 yen per dollar while holding firm against most other currencies. The offshore yuan also rose 0.2 percent to 6.7065.

Against a basket of currencies the dollar was flat, however, and the European session opened with most major currencies trading in tight ranges.

The focus for the day is U.S. labour market data due out at 1230 GMT, which will help traders decide how the U.S. economy is holding up. MUFG analysts said the market was “struggling for direction” before the jobs report.

Expectations are for a rebound in jobs growth in March and a weak February. ING analysts said that should the data show 160,000 to 170,000 jobs were produced in March the dollar would gain.

“Such an NFP (non-farm payrolls) release should prove slightly positive for the dollar against the low-yielders ($/JPY to 112.20), but probably good for risk assets in general – confirming that US domestic demand should stay strong and allaying recession fears,” they said in a note.

The euro rose slightly to 1.1228, its gains capped after data released on Thursday showed German industrial order dropped in February.

Sterling strengthened back towards $1.31 as a senior European Union source said Donald Tusk was likely to offer Britain a flexible extension of the date of the country’s exit from the bloc of up to one year.

The pound was up 0.2 percent at $1.3093.

The Australian dollar rose 0.2 percent to $0.71245.

The currency has risen this week, supported as signs of progress in the U.S.-China trade dispute lifted risk assets and commodity prices

The yen slipped and the Australian dollar rose on Wednesday as concerns over the U.S.-China tariff war receded further following a Financial Times report that the two sides have resolved most of the issues standing in the way of a trade deal.

The yen was a touch lower at 111.455 per dollar after brushing 111.53, its weakest since March 20.

The Japanese currency, a perceived safe-haven, is often sold when risk aversion abates in the broader markets.

“The latest trade-related headlines are adding to the ‘risk-on’ mood in the markets,” said Koji Fukaya, president of FPG Securities in Tokyo.

“That said, the overall response by currencies has been calm so far, as few expected U.S.-China trade negotiations to actually end in acrimony. We now need to see whether any agreement on trade issues can lead to an amendment in recently subdued economic views.”

The Australian dollar gained 0.35 percent to $0.7097, trimming a bulk of the losses suffered the previous day in response to the Reserve Bank of Australia’s policy decision.

The RBA on Tuesday left interest rates unchanged as expected but its statements were seen by some as hints towards a shift to easier monetary policy going forward.

The Aussie climbed 0.55 percent to 79.17 yen.

“Major central banks are embracing dovish rhetoric, which supports ‘risk on’ in the markets. The yen stands to remain on the defensive under such conditions,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

The Australian dollar is sensitive to shifts in risk sentiment and also reacts to expectations towards the economic fortunes of China, the country’s main trading partner.

The dollar index against a basket of six major currencies was down 0.1 percent at 97.236, having lost some traction after climbing a 3-1/2-week peak of 95.517 the previous day.

The greenback had reached that high as ebbing risk aversion in the broader markets pushed up long-term U.S. yields from 15-month lows.

The sharp bounce by Treasury yields ran out of steam, however, slowing the dollar’s advance in turn.

The pound was effectively flat at $1.3136.

Sterling had gained 0.25 percent the previous day after Prime Minister Theresa May said she would seek another Brexit delay to work with the opposition Labour leader on an alternative EU divorce deal, a last-ditch gambit to break an impasse over Britain’s departure.

The euro nudged up 0.15 percent to $1.1224 after slipping overnight to $1.1183, its lowest since March 8, weighed by a decline in German bund yields.

German yields have been anchored below zero as the deadlock over Brexit has fueled investor demand for the safe havens.

Sterling fell across the board on Monday as uncertainty rose after British lawmakers failed to find a convincing majority for any alternative option to Prime Minister Theresa May’s Brexit deal.

Lawmakers grabbed control of the Brexit process for a second day on Monday in order to try to find a majority for an alternative way forward that could break the parliamentary deadlock.

But with no clear majority emerging for any of the indicative votes, traders dumped the British currency on concerns that Britain may fall out of the European Union without negotiating a deal on April. 12.

Sterling fell to $1.3048, down nearly 1 percent from levels before the decision on the vote. Against the euro, it fell by a similar margin to 85.84 pence.