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James Hyerczyk
Japanese Yen

The Dollar/Yen is under pressure again early Thursday as investors continue to seek protection in the Japanese Yen on dimmed hopes of a U.S.-China trade deal. The Forex pair is also being driven lower by falling U.S. Treasury yields. However, it’s also being slightly underpinned by steady demand for risky assets as U.S. equity markets continue to hover just below record highs.

At 05:55 GMT, the USD/JPY is trading 108.737, down 0.071 or -0.07%.


US-China Trade Deal Doubts Pressure USD/JPY

The Dollar/Yen is being pressured by doubts that trade agreement between the United States and China will be reached over the near-term. This is encouraging investors to shift money into the safe-haven Japanese Yen.

U.S.-China trade negotiations have ‘hit a snag’ over farm purchases, with Beijing not wanting a deal that looks one-sided in favor of the United States, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.

The report came after U.S. President Donald Trump said a trade deal with China was “close,” but offered no details and warned that he would raise tariffs “substantially” on Chinese goods if there was no deal.


Japan Economic Data

Japan’s economy ground to a near standstill in the third quarter with growth at its weakest in a year as the U.S.-China trade war and soft global demand knocked exports, keeping pressure on policymakers to ramp up stimulus to bolster a fragile recovery.

Private consumption also cooled from the previous quarter, casting doubt on the Bank of Japan’s view that robust domestic demand will offset the impact from intensifying global risks.

The world’s third-largest economy grew an annualized 0.2% in the third quarter, slowing sharply from a revised 1.8% expansion in April-June, preliminary gross domestic product (GDP) data released by the government showed on Thursday.

It fell well short of a median market forecast for a 0.8% gain and marked the weakest growth since a 2.0% contraction in July-September last year.

Daily Forecast

The Japanese Yen hardly budged after Japan’s GDP data showed the economy grew an annualized 0.2% in July-September, much below economists’ forecast of 0.8%. This is because investors are focused on the lack of progress over a trade deal, and the Japanese Yen’s appeal as a safe-haven asset.

Look for the Dollar/Yen to continue to weaken if expectations over a trade deal continue to deteriorate. Keep an eye on U.S. Treasury yields. If this continue to fall then look for the USD/JPY to remain under pressure since this will signal the tone is “risk-off”, even with U.S. stocks hovering near record highs.

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