The Japanese yen soared slightly against the U.S.
dollar on Wednesday, resuming its rebound from a 7-1/2-month trough, amid some deterioration
in risk sentiment as the U.S. intends to hold tariffs on Chinese goods until
after November.
The USDJPY is currently trading lower at 109.94
after hitting a low of 109.81, resuming retreat from yesterday’s peak of 110.21,
the highest since May 23, 2019.
As shown in the previous chart, the USDJPY rose
to retest the long-term downtrend, which has been dominating the pair’s movements
since 2015.
While the signing of the phase-one trade
agreement, expected on Wednesday in Washington, should have improved the risk
sentiment, concerns were revived after U.S. Treasury Secretary Steven Mnuchin
told reporters Tuesday that tariff cuts would be considered as part of a
phase-two agreement with China.
Also, U.S. President’s Administration is
meanwhile setting rules disallowing more sales to Chinese Huawei Technologies.
Hence, it seems that the tensions between the
world’s biggest economies would extend beyond the signing of the phase-one trade
pact.
The yen snapped some of its gains after Bank of
Japan Governor Haruhiko Kuroda said on Wednesday the central bank will
not hesitate to ease monetary policy further while making alterations as
necessary to reach the 2% inflation objective.
Kuroda gave some remarks ahead of the January
20-21 monetary policy meeting at which the BOJ is predicted to slightly revise up its economic forecasts for the fiscal year debuting in April.
Given a positive output gap and rises in
inflation expectations, Kuroda estimates acceleration in inflation
towards targets, but hinted to negative impact from the latest declines in oil
prices.
Asian stocks plummeted today, while safe havens,
most notably gold and Swiss franc managed to gain some ground.
The U.S. dollar index was little changed
trading at 97.10, ahead of U.S. PPI, Empire State manufacturing index and comments
from FOMC members Harker and Kaplan.
The dollar faced some downside pressure on Tuesday after the consumer
prices showed a minor 0.2 percent increase in December, thereby endorsing views
the Fed would hold borrowing cost until the end of this year.
