The Japanese yen rose in the Asian market today, extending gains for the third consecutive day against the US dollar, and is about to touch its highest level in five months. The rise came amid increased demand for safe havens, as concerns in financial markets grew amid global economic and political volatility. At the same time, lower US yields supported the yen’s gains, especially with a sharp drop in yields on ten-year US Treasuries. These factors left markets waiting for the monthly jobs report in the US, which is expected to provide decisive signals on whether the Federal Reserve will cut interest rates this month.
In today’s trading details, the dollar fell against the yen by 0.35% to reach 147.44 yen, after opening trading at 147.98 yen and hitting a high of 148.16 yen. The yen ended Thursday’s trading up 0.6% against the dollar, hitting a five-month high of 147.31 yen, amid investors’ continued risk aversion in the markets.
For the current week, the Japanese yen is showing a weekly gain of around 2% against the US dollar, making it on track for its second weekly gain in the last three weeks. This comes after the activity of dismantling curry yen deals that affected the market movement this week.
Wall Street renewed the open sell-off of US stocks on Thursday, with major indexes hitting four-month lows due to concerns about the global trade war and its potential effects on US economic growth. These concerns, combined with the trend towards safer assets, have helped boost the JPY’s safe-haven appeal under volatile market conditions.
The impact of US yields on the movement of the yen
US yields significantly affect the movement of the Japanese yen, as the yield on US bonds is one of the main factors affecting the movement of global currencies. When yields on US bonds rise, the dollar becomes more attractive to investors, leading to increased demand and appreciation against other currencies, including the Japanese yen. This is because higher yields mean better returns for investors looking to maximize their profits through bond investments.
On the other hand, when US yields fall, investors usually turn to looking for safer assets, and the Japanese yen is one of them. The Japanese yen is considered one of the safe currencies that markets resort to in times of uncertainty or economic fluctuations. Thus, when yields on US bonds fall, demand for the dollar declines and investors prefer to buy the Japanese yen, pushing the currency higher against the dollar.
This effect is sometimes exacerbated by other economic factors, such as expectations about the US Federal Reserve’s interest policy. If markets expect a cut in US interest rates, this could lead to lower yields on US bonds, thereby supporting a stronger Japanese yen.
Overall, the yield on US bonds is an important element in determining the movement of the Japanese yen, as it is closely related to the dollar’s attractiveness against other currencies and market sentiment towards safe-haven assets in times of turmoil. Ultimately, trade wars put significant pressure on the global economy, harming economic stability and leading to a decline in economic growth levels. Fears of trade wars are factors that significantly affect the global economy, contributing to creating uncertainty that negatively affects economic growth, investment and trade.
The impact of trade war fears on the global economy
Fears of trade wars are one of the most prominent factors affecting the global economy in modern times, as they can cause significant disruptions in financial markets and threaten the stability of major economies. When trade tensions arise between countries, especially between major economic powers such as the United States and China, it worries investors and consumers alike. Concerns rise about the possibility of new tariffs or other trade restrictions, negatively impacting global trade flows and increasing the cost of goods and services.
These concerns are slowing economic activity in many countries, as companies begin to reduce their investments and freeze their new projects as a result of uncertainty about the future of international trade. In addition, financial markets are highly volatile, as investors avoid riskier assets and look for safe havens such as the Japanese yen or gold. This shift in investments contributes to the promotion of safe-haven currencies and devalues the most vulnerable currencies, such as the US dollar if the United States is the fearing party.
Moreover, the trade war is affecting global supply chains, as producers may have difficulty obtaining raw materials or components for their industries, delaying production and increasing costs. This hinders the ability of companies to expand and grow and limits employment opportunities in some sectors. Trade wars are also slowing growth in emerging economies that rely on exports to major markets, exacerbating the difficulty and vulnerability of small economies.
The trade war impacts not only the countries involved but also the global economy, as increasing uncertainty affects companies’ ability to make informed investment decisions.
