U.S. Treasury Secretary Steven Mnuchin’s Statement On China-US Trade War Influences Yen Decline
Steven Mnuchin, the secretary of the U.S. Treasury was one of the speakers at the G20 summit held in Japan. However, his statements did not arouse excitement and even ended up sending the Japanese Yen on a bit of a downward spiral.
The Japanese Yen and the Swiss Franc have often considered as haven currencies, but they performed poorly on Wednesday compared to their counterparts.
This is despite the poor performance of the stock markets, which normally would not affect the Yen that much. However, poor performance has been attributed to Mnuchin’s statement regarding the trade talks between China and the U.S.
In his statement, Mnuchin revealed that the trade talks are 90% complete and that he was hopeful that a deal would materialize. The U.S. Treasury Secretary also pointed out that Chinese President Xi Jinping and U.S. president Donald Trump have a good working rapport.
Mnuchin’s statement did not have as big an impact as it should have
Unfortunately, Mnuchin’s statement was not enough to maintain a bullish momentum in the equities market. This was evident in the Euro Stoxx 50 and the S&P 500, which closed the trading session lower than their opening price points, perhaps because investors decided to tread with caution.
It is no surprise that Mnuchin’s statement did not have as much of an impact as it should have because it was not the first time that he made a statement expressing optimism about the trade talks. He made similar remarks in April this year when he stated that the two countries were close to signing a deal.
Meanwhile, sources told Hong Kong-based news outlet South China Morning Post that China and the U.S. reached a tentative agreement. They also revealed that the two countries struck the agreement just before the presidents of the two countries met ahead of the G20 summit.
USD/JPY technical performance
A look at the technical performance of the USD/JPY currency pair this week reveals that the price level kicked off the week on a bearish trend on Monday. However, there was a significant pullback on Tuesday as the bulls started to gain momentum which carried on to Wednesday.
The USD gained significant ground against the JPY on Wednesday in line with Mnuchin’s statement, but as noted earlier, the gains were not as pronounced because investors are still treading cautiously.
Other factors, such as low economic growth in China, have also affected the overall global market and thus influenced investors to proceed with caution.
The JPY is one of the few major currencies that are considered as haven currencies because they tend to gain value in times of crisis. For example, its value recently went up due to more demand as tensions increased between the U.S. and Iran.
The JPY has so far surged by 2.7% against the U.S. dollar within the second quarter of 2019. This gain was mainly fueled by expectations of interest rate cuts by the Federal Reserve.
The Yen’s performance has been having a blast lately with the long-standing China-U.S. trade war.