The foreign exchange markets were certainly treading water on Wednesday. Investors were unable to decide how they felt about the widespread fallout from the Sino and US dispute. When you look at the safe-haven however, you’ll soon see that the Japanese Yen gained a lot against the dollar. Those tensions are certainly overshadowed when you look at the bounce in the US stock market. It also went on to prompt a lot of reluctance with new positions in risk assets. When you look at the FX markets, the dollar seemed to dip as a lot of people bet Trump that the tariffs brought in from China would damage the currency. Other people however thought that the row would be contained and not spill out onto the market.
The FX market is said to be treading water at the moment and this is because of the world disputes that are currently happening. The US dollar fell 0.2% and the yen is certainly going to benefit most from this trade war. The greenback also gained on the yen the day before and this happened when the risk improved. This, combined with the fact that Wall Street’s main indexes went ahead and advanced really helped the dollar to stabilise. This is certainly the case after the many recent declines that had a lot of traders concerned.
The euro went down 0.1% and this was against the dollar. When you look at the major currencies, the dollar was also down 0.1% and this left it hanging in at 90.102. The data that is going to be collected on Wednesday could really help investors to keep their focus on the central bank policy, or at least this should be the case with the euro. The euro zone inflation numbers are due in at 0900 GMT and they are expected to experience a full pick-me-up. This could also offer some support to certain currencies who have been stuck in the range of trading for the last couple of months.
The won fell 0.5% against the dollar and this meant that it dropped to 1058.57 won. The Korean economy is really exposed when it comes to the trade flow but it is said that there are some parts of the market that are going to undergo trade disputes. This could further hurt global growth. The Trump administration has raised the stakes and this is all due to the showdown that is happening with China. 25% tariffs on over 1,300 technology, medical and even transport products are certainly going to force some changes with Beijing’s property practices.
China’s own Ministry of Commerce have stated that they will take a measure of equal intensity against US goods. The constant worries and even the tension that is happening across the world will really weigh on the dollar in comparison to the yen. That being said, a rise towards the 108 yen seems unlikely. At the very same time, the March year-end is now out of the way and this could limit the amount of downside risk that the dollar is going up against.
It is said that the US currency is going to trade in at 104 yen to 108 yen and this could happen very soon. Investors are also very focused on US payroll data and even comments from the Federal Reserve Chairman. This should really help to decide which direction the dollar is going to move in. The Australian dollar rose 0.4% to $0.7712. This is after data showed a huge rise in Australian retail profits, so it doesn’t come as a surprise at all.