Yen Approaches 2019 Low Amid Safe Haven Demand And Higher Risk Appetite
The Yen took a hit on Monday, and its price approached its lowest levels since the start of 2019 despite the rallying global markets and rising demand for safe-haven currencies.
The Yen turned bearish on Monday with the price hitting a 112.09 low against the US dollar which means it almost fell to the 112.135 which is currently its lowest price level in 2019. China recently released strong economic data and together with the U.S.- China trade talks have created an optimistic atmosphere that has encouraged traders to bet on riskier currencies.
"USD/JPY is testing the 112.00 level, and we expect the cross to break above this level this week in response to solid US data and stabilizing risk appetite," ING analysts reported.
The Swiss Franc which happens to be one of the most popular haven currencies also lost ground against the Euro. Its price fell by 1.5% from 1.1164 which is it's 2019 high that it reached in March. Meanwhile, the positive sentiments in the global market received a boost from a worldwide economy assessment by the International Monetary Fund (IMF).
US Treasury is confident about the U.S.- China negotiations
The positive expectations were further fueled by a statement by Steven Mnuchin, the US Treasury Secretary. He expressed optimism in U.S.-China trade negotiations which he also believes are approaching their conclusion. China’s imports are still weak, but the recently published data might be a sign that the Chinese economy might be approaching a turnaround. Beijing has already eased its deleveraging activities and also taken a proactive approach towards boosting the economy.
Other notable market trends that were recently observed include the declining dollar index which fell by 0.1% to around 96.858 while the Euro gained by 0.1% to $1.1309. The dollar’s performance tends to weaken when the risk appetite goes up, but data released on Friday indicates that traders recently reinforced their dollar positions. It has also reached its newest highs ever since December 2015 and traders are still short on the Euro.
Flash purchasing managers released upbeat index survey data about the Euro Zone on Thursday. Analysts believe that this data might encourage Euro shorts and push the dollar even higher. Positive earnings data announced by JPMorgan promoted a strong rally by US stocks on Friday. Walt Disney Co. surged by 11.5%, making it one of the biggest gainers of the day after the announcement that it would start streaming content.
US Dollar gains might not be as much as expected
Still, on market triggers, there were concerns about planned trade talks between Japan and the U.S., but the positive mood in the market has offset those concerns. MUFG Bank’s chief currency analyst Minori Uchida pointed out that a classical-on risk market has been observed. Uchida also believes that dollar gains might be limited especially now that speculators have already set up huge long positions on the U.S dollar.
The net dollar long position against the yen recently reached its highest level over the last three months. The Australian dollar which is used as an indicator for investor sentiments recently reached an 18-month high at $0.71925.