Japanese Yen Gains As China-U.S. Tariffs Kick In
The Japanese Yen has kicked off Monday’s trading session and subsequently September as Both China and the U.S. implement their new tariffs against each other.
The rollout of the new tariff regimes by the two countries has created favorable conditions for the Japanese Yen to grow as more investors embrace it as a safe haven. This has contributed to significant gains for the Japanese currency while the Chinese Yuan continues to take a hit. The US dollar was also not spared as it weakened against the Yen on Friday as investors anticipated the rollout of the new tariffs.
The U.S. added 15% tariffs to a variety of Chinese products imported into the U.S. while China hiked import duty on crude oil imported from the U.S.
The continuation of the trade war has so far led to a lot of uncertainty in the market, forcing investors to take a cautionary stance on their investments. The season has also been characterized by increased investment in safe havens such as gold and the Japanese Yen.
The impact of the tariff rollout is evident this week by the bullish performance of the USD/JPY chart. The currency pair traded as low as 105.9430 early on Sunday morning, and it maintained its bullish momentum on Monday with the price peaking at 106.4010.
There have also been other factors contributing to the Yen’s surge. For example, investors have shifted to the Yen to avoid risky market conditions that might be caused by sensitive economic data from China and the U.S. that is expected to come out this week. The economic data is expected to provide a good view of how the two economies have been affected by the trade war.
Some analysts expect China's risk sentiments to be low, especially on account of the Hong Kong Protests. The global community is currently watching to see whether the U.S and China will hopefully manage to strike a deal that will end their trade standoff.
The Bank of Japan is worried about the impact of the stronger Yen
The rise of the Japanese Yen is only a good thing to some extent. The Bank of Japan has expressed concerns over the impact of the Yen growing too strong. The BOJ believes that the Japanese currency would cause a negative impact, especially on corporate profits if it continues to grow stronger. This has provoked analysts to speculate that the Japanese central bank will likely intervene in an attempt to maintain a favorable balance.
Meanwhile, Japan has seen a positive but cautious economic growth, especially from the 1.2% year over year growth that war reported in Q2 last year.
However, it is yet to match the 2.4% growth rate that was achieved in Q4 2019. Despite its currency doing well, the country’s economy is not performing as well as expected because of the volatile and slowed global trade situation. This has also affected Japan’s local manufacturing PMI and its merchandise trade exports.