Japanese Yen Rallies on Trade and Economic Growth Concerns

The Japanese yen today rallied against the US dollar as investors remained worried about the trade tensions between the US and China, which resulted in a risk averse market sentiment. Investors were also worried about the prospects of slower global economic growth next year, which made the safe haven yen more appealing.
The USD/JPY currency pair today dropped from an opening high of 110.94 to a 2-day low of 110.32 due to the stronger Japanese yen.
The yen’s rally was largely triggered by yesterday’s news that President Donald Trump was considering issuing an executive order barring US companies from using ZTE and Huawei products. This report reversed the positive market sentiment that had been triggered by an earlier Bloomberg news report indicating that the US and China would resume trade talks early next year. The latest news reignited investors fears that the world’s two largest economies would not be able to resolve their trade differences any time soon, which could drastically hinder global trade and economic growth.
Yesterday’s weak Chinese industrial profits data also weighed on the US dollar as it was perceived as evidence that global economic growth was actually slowing down. Investors are also expecting US economic growth to slow down next year, which has markets pricing in just one rate hike in 2019.
The yen’s short-term performance is likely to be driven by market risk sentiment and the release of the US advance goods trade balance later today.
The USD/JPY currency pair was trading at 110.41 as at 09:25 GMT having dropped from a high of 110.94. The GBP/JPY currency pair was trading at 139.57 having fallen from a high of 140.38.

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