The Japanese yen has been the star performer of recent days and by Monday afternoon in London it was once again trading higher against most of the world’s currencies. When last seen, USD/JPY stood at 111.
The catalyst for the yen’s rally away from multi-month lows was President Trump’s weak-dollar rhetoric on Thursday and Friday of last week. In interviews with CNBC, Trump expressed concern for US exporters in the current strong dollar environment and criticized the Federal Reserve’s policy of gradual interest rate increases. Higher interest rates, Trump said, took away America’s “big competitive advantage.” Prior to Trump’s remarks, the dollar had climbed to a one-year high against a basket of currencies.
Yen bulls had further cause to enter the market on Monday when Japanese yields surged amid speculation that the Bank of Japan will soon make changes to its ultra-loose monetary policy. At one stage, the yield on 10-year Japanese government bonds reached 0.09 percent, up 6 basis points, marking the biggest increase in yields in nearly two years.
Another Asian currency in the spotlight in the past week is the Chinese yuan, which recovered slightly on Monday to 6.786 per dollar from Friday’s thirteen-month low (USD/CNY high) of 6.811.
It appears that the Chinese might view a weaker currency as the answer to a trade war with the US. The People’s Bank of China signalled its intent on Friday when it raised the USD/CNY midpoint by 605 pips – the largest one-day devaluation of the yuan since June 2016.
Given their different trajectories, it should come as no surprise, then, to learn that the yuan is being hammered against the yen. On Monday afternoon, the yuan was buying only 16.34 yen, less than at any time within the past eleven months.
The euro fell late last week from a four-and-a-half-month high against the pound and continues to weaken on Monday. EUR/GBP, now at 0.892, will likely trade cautiously ahead of Thursday’s ECB press conference, as will EUR/USD, which continues to trade within the middle third of its recent 1.15-1.185 range, at 1.171.
Bitcoin appears to have bottomed out for now. The world’s largest cryptocurrency was last seen trading at $7,700, nearly 30 percent higher than its price ten days ago; however, it remains down 60 percent on December’s euphoric levels just shy of $20,000.
Having held the market up in February and again throughout June and early July, $6,000 appears to be major support in bitcoin and will be an important reference point for the market going forward.
Unlike bitcoin, ethereum continues to trade sideways. Monday afternoon’s prices in the $460s are little changed from those a month ago.