The yen chalked up some more gains against its counterparts thanks to mixed statements spurring on trade war concerns.
Japan won’t be printing any top-tier economic report this week, so all eyes will likely be on the tariffs that the U.S. and China are scheduled to implement starting July 6.
If Trump and his team decide to push their strong stance against China’s products or business practices, or if we hear more about China’s preparation for a “full-scale trade war,” then we might see the yen climb higher across the board.
But if both sides stop at this week’s tariffs and make efforts to reach deals instead of slapping on additional tariffs on each other’s products, then we might see the yen retrace some of its gains as it gives way to higher-yielding assets.
Make sure you’re glued to the tube for headlines that might affect overall risk sentiment!
Last Week’s Price Review
The yen is mixed but a net winner yet again this week (as of 8 am GMT). And if the yen maintains its ranking until the end of the trading day, then the yen will chalk its third consecutive week of net wins.
As usual, yen pairs were taking directional cues from bond yields. And this week, bond yields were down because of safe-haven demand for bonds due to trade war fears, market analysts say.
Interestingly enough, bond yields slumped hard on Wednesday. Instead of strengthening, however, the yen was on the back foot then, especially during the London session.
And as noted in Wednesday’s London session recap, that was apparently due to a CNBC report that cited an unnamed “senior administration official” and a separate report from The New York Times that cited anonymous “administration officials”, which claimed that U.S. President Trump has already decided not to push through with his original plan to ban Chinese and partially Chinese-owned companies from investing in U.S. tech companies in order to protect U.S. intellectual property.
Instead, Trump supposedly decided to go with Treasury Secretary Mnuchin’s idea to consult and use the Committee on Foreign Investments in the United States (CFIUS), which is deemed to be less harsh compared to Trump’s original plan to ban Chinese investments outright.
Anyhow, these reports caused risk sentiment to suddenly switch to risk-on, which severely weakened the yen at the time.
Bond yields continued to slide, though, and the euphoria caused by those reports evaporated later on when U.S. National Economic Council Head Larry Kudlow said during the U.S. session that Trump did decide to use CFIUS, but that the decision is “not meant to be harder or softer,” adding that “It’s going to be very comprehensive and very effective at protecting our technological family jewels in the United States.”