The dollar fell by a considerable amount on Monday. It dropped against the yen and this is the third time in a row. This is mostly because China have imposed some additional tariffs on various US products. This has really driven a dispute between the two of the largest economies in the world. China has now slapped the US with plenty of additional tariffs and this included a 25% markup on various US products. So far, 128 products have been hit and this includes frozen pork, fruit, nuts and wine. There are also way more tariffs on aluminium and even steel. This comes directly from China’s own finance ministry. The tariffs are due to take place today and it is going to include over $3 billion dollars’ worth of US goods.
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The yen and even the Swiss franc are the real winners here and this is because the equity induced sell-offs have all been triggered by concerns over trade. The concerns raise a lot of queries about global growth and there is also more of a risk premium on the euro as well. The Japanese and even the Swiss units have always been known as being a safe-haven when it comes to currencies and they really do benefit from this but at the dollar’s expense. This is especially during times when geopolitical and even financial tensions are very high. The Swiss Franc has been traded for a lower amount against the dollar but it has been catching up due to the sell-off of US stocks.
The greenback also fell 0.6% against the yen (105.68) after it rose over 1.5% last week. This was its biggest yearly gain since September 2017. The dollar also rose against the yen throughout most of last week and this was really helped by the fact that the US and China were working in secret to try and avoid a full-blown trade war.
The dollar really is going to struggle against the yen for quite some time and this is because of the mounting tension between the US and China. Trump is said to release a huge list of products that are going to be hit with the tariffs and this is expected to land on Friday. When you look beyond the trade war that is slowly brewing, investors also need to stay focused on any US data this week. This includes data that is being led by non-farm based payrolls. The reports should help to determine what path the future interest rate is going to take as the interest rate carries on increasing. The euro was down by 0.1% and this comes with a lot of caution, as the state of the US stock market remains uncertain.