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FOREX-Yen, Swiss franc shine as trade tensions spark flight to safety

Published 03/06/2019, 01:39 pm
Updated 03/06/2019, 01:40 pm
© Reuters.  FOREX-Yen, Swiss franc shine as trade tensions spark flight to safety
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* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Daniel Leussink

TOKYO, June 3 (Reuters) - The yen brushed a more than four-month high against the dollar on Monday and the Swiss franc rose as U.S. President Donald Trump's hard stance on trade broadened to countries beyond China, stoking investor demand for safe-haven assets.

With trade issues remaining front-and-centre, investor appetite for risk has been dampened by fears of a global growth slowdown that has helped stoke demand for government debt and triggered an equity sell-off.

Perceived safe-haven assets were well supported despite a private survey on the Chinese manufacturing sector CNPMI=ECI pointing to a modest expansion in factory activity as export orders bounced from a contraction. a recent development, U.S. and Mexican officials were preparing for trade talks after Trump vowed to impose punitive tariffs on all Mexican goods in an intensifying dispute over migration.

"The Mexican news is quite punchy. No one was really expecting it to the same extent they were with China," said Chris Weston, Melbourne-based head of research at foreign exchange brokerage Pepperstone.

"Mexico is a huge trade partner with the U.S.," he said.

The Swiss franc CHF= rallied 0.3% against the dollar to 0.9975 and the yen JPY= gained 0.15% to 108.10 yen, its highest since mid-January.

On Friday, the Japanese currency had booked its sharpest daily rise in more than two years, climbing a little over 1.2% during the session.

The yen is considered a safe haven asset in times of geopolitical and financial turmoil as Japan is the world's biggest creditor nation.

U.S. and Mexican officials were preparing on Sunday for upcoming talks aimed at averting a trade clash after Trump said he would apply 5% tariffs on the country's goods on June 10 if it does not halt the flow of illegal immigration across the U.S.-Mexico border. day earlier, Mexico's president Andres Manuel Lopez Obrador had hinted his country could tighten migration controls to defuse tensions with Trump, saying he expected "good results" from talks with Washington. Mexican peso MXN=D4 , hit by Trump's sudden threat to impose tariffs on Friday, regained some stability, trading at 19.6165 to the dollar, after its 2.5% fall on Friday.

Market participants also kept a focus on the trade dispute between the United States and China, the world's two largest economies.

A senior Chinese official and trade negotiator said on Sunday Washington cannot use pressure to force a trade deal on China and refused to be drawn on whether the leaders of the two countries would meet at the G20 summit in Japan at the end of the month to bash out an agreement. are trying to catch up with negative news in relation to trade relations for the time being," said Kumiko Ishikawa, senior analyst at Sony Financial Holdings.

"They're seriously starting to react to prolonged trade tensions in a risk-off way."

The dollar dipped after benchmark 10-year U.S. Treasury yields US10YT=RR hit as low as 2.121% on Monday, their lowest since September 2017.

Against a basket of six major currencies, the dollar slipped 0.15% to 97.606 .DXY , though it is still up 1.5% for the year.

The euro EUR= gained 0.15% to $1.1185, rising for a second session after tacking on 0.35% on Friday - its first gain in five sessions.

The Australian dollar AUD=D4 was up 0.3% to hit a near three-week high of $0.6958 on the back of the positive Chinese factory activity reading.

The Aussie's gain came despite a New York Times report, citing sources, that Trump had been urged to impose tariffs on Australian imports in response to an increase in exports of aluminium to the United States over the last year. (Editing by Sam Holmes and Jacqueline Wong)

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