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Yen hits more than 4-month high on trade war, growth worries

US-China trade tensions, Trump's tariff threat on Mexico stoke demand for perceived safe-haven currencies

Donald Trump's hard stance on trade on countries beyond China is forcing investors to switch to safe-haven assets such as the Swiss franc and the Japanese yen, and including government bonds.


THE yen brushed a more than four-month high against the US dollar on Monday as US President Donald Trump's hard stance on trade broadened to countries beyond China, forcing investors to safe-haven assets, including government bonds.

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

In a recent development, US and Mexican officials were preparing for trade talks after Mr Trump vowed to impose punitive tariffs on all Mexican goods in an intensifying dispute over migration.

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"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 US," he said.

Mr Weston added that the news of Mr Trump's tariff threat on Mexico helped stoke demand for perceived safe-haven currencies, such as the Swiss franc and Japanese yen.

The yen was last steady at 108.23 yen per US dollar, paring gains after briefly hitting 108.17, its highest since Jan 15. On Friday, it had booked its sharpest daily rise in more than two years, climbing a little over 1.2 per cent during the session.

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

US and Mexican officials were preparing on Sunday for upcoming talks aimed at averting a trade clash after Mr Trump said he will apply 5 per cent tariffs on Mexican goods on June 10, if Mexico does not halt the flow of illegal immigration across the US-Mexican border. A day earlier, Mexico's president Andres Manuel Lopez Obrador had hinted his country could tighten migration controls to defuse tensions with Mr Trump, saying he expected "good results" from talks with Washington. 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.

The US dollar held mostly steady even after benchmark 10-year US Treasury yields hit as low as 2.121 per cent early on Monday, their lowest since September 2017.

The euro on Monday gained 0.1 per cent to US$1.1178, rising for a second session after tacking on 0.35 per cent on Friday - its first gain in five sessions.

The Australian dollar was 0.1 per cent higher at US$0.6943, hovering close to a more than two-week high of US$0.6945 last touched on May 15.

The Mexican peso, hit by Mr Trump's sudden threat to impose tariffs on Friday, regained some stability, trading at 19.634 to the US dollar, after its 2.5 per cent fall on Friday. REUTERS