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US dollar slips vs yen as trade tensions weigh

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The US dollar fell to a fresh two-week low against the Japanese yen on Monday, as worries about escalating trade tensions between the United States and other leading economies hurt risk appetite.

[NEW YORK] The US dollar fell to a fresh two-week low against the Japanese yen on Monday, as worries about escalating trade tensions between the United States and other leading economies hurt risk appetite.

The greenback was down 0.44 per cent at 109.48 yen, after slipping to a two-week low of 109.38 earlier in the session.

The US Treasury Department is drafting curbs that would block firms with at least 25 per cent Chinese ownership from buying US companies with "industrially significant technology," a government official briefed on the matter said on Sunday.

US Treasury Secretary Steven Mnuchin said on Monday that forthcoming investment restrictions from the Treasury will not be specific to China but would apply "to all countries that are trying to steal our technology."

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The news added to the sense of caution felt after US President Donald Trump on Friday threatened to impose a 20 per cent tariff on cars imported from the European Union. The EU said it would be forced to retaliate.

The growing trade-related tensions pulled global stocks markets lower.

"The dollar-yen is continuing to have a little bit of safe-haven trading and still pressing down in the session as equities fail to recover," said Amo Sahota, director at Klarity FX in San Francisco.

The yen tends to benefit during geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize.

"A new week is underway and yet the same concerns remain as Donald Trump ramps up trade threats against China and the EU (European Union) which continues to take its toll on risk appetite," Craig Erlam, senior market analyst at OANDA in London, said in a note to clients.

The dollar index, which measures the greenback against a basket of six major currencies, was down 0.28 per cent at 94.249.

"The danger here is that the dollar index softens out a little bit more this week," said Sahota.

China's yuan on Monday ended the official domestic trading session at its lowest in six months after the central bank cut reserve requirements for some banks to boost lending .

The euro was 0.45 per cent higher against the greenback at US$1.1708, after hitting a more than one-week high of US$1.1713.

The euro's gains come after it strengthened on Friday following improved regional economic growth data and new assurances by Italian politicians that their nation would not leave the single currency.

Still, the euro remains vulnerable to regional political instability as German Chancellor Angela Merkel faces pressure to deal with the migration dispute that has divided Europe and threatened her own government.

The commodity-linked Aussie, kiwi and loonie were weak as a surge in crude oil prices ran out of steam.

REUTERS