Yen firm on Sino-US trade dispute fears

Dollar little changed as it struggles to gain traction after a 3-day falling session

The yen held firm on Tuesday as escalating US-China trade tensions stirred up fears over the outlook for global growth, sapping investors’ risk appetite.

The dollar was little changed at 106.18 yen at 6.30 pm, struggling to gain traction after having fallen for three straight trading days, and trading below a two-week high around 107.00 yen set on March 28.

The yen had risen on Monday as US equities tumbled, with the S&P 500 sliding 2.23 percent as investors fled technology shares amid resurgent worries over a trade war.

The sell-off in US equities came after China imposed extra tariffs on US products, escalating a dispute between the world’s two biggest economic powers.

“It’s going to be choppy, but... given how fragile equity markets look right now, I think the clear trade is dollar/yen lower,” said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.

Investors’ risk appetite is unlikely to recover quickly unless there is some easing in the USChina trade tensions, he added.

“I don’t think people will be looking to put risk on too quickly until something positive develops on the trade front,” Innes said.

The Japanese yen tends to benefit at the dollar’s expense during times of international political and financial turbulence.

The yen had risen in March as worries over the risk of a global trade war roiled financial markets. That had sent the dollar down to a 16-month low of 104.56 yen on March 26.

Some market participants said the dollar could find support against the yen for now, especially if Japanese importers and institutional investors opt to buy the dollar on dips.

The trade dispute between China and the US is seen likely to be a market focus in the near term.

The Trump administration is expected sometime this week to publish a list of Chinese goods that could be subjected to new US tariffs.

China’s Ambassador to the US said the Chinese government will take counter-measures of the “same proportion” and scale if Washington imposes more tariffs on Chinese goods from a trade probe, state television reported on Tuesday.