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Yen hits three-month high on US-China trade conflict
THE Japanese yen surged to a three-month high against the US dollar on Thursday as investors sought out the safe-haven currency, fearing the US-China trade conflict will escalate.
Two days of trade talks begin in Washington on Thursday, and traders are waiting to see whether Chinese and US negotiators can salvage a deal to prevent more US tariff increases.
Currency moves this week in response to the latest trade hostilities have been fairly muted, but Thursday's jump in the yen - which tends to attract demand in times of strife - suggested that investor nerves are fraying.
The main casualties have been the Australian dollar , a proxy for Chinese economic prospects, the US dollar and the offshore Chinese yuan.
The yuan on Thursday fell half a per cent to a four-month low of 6.8503 and was headed for its worst four-day decline in a year.
"The Chinese yuan really is the world's most important currency," said Societe Generale analyst Kit Juckes.
"It isn't the most traded but is an anchor of stability for all markets and if that anchor is dislodged it will lead the dollar and yen higher."
In the past, the dollar has benefited from an increase in trade worries. But US President Donald Trump's latest threat to raise tariffs on Chinese imports has seen the yen gain in recent days.
It rose 0.3 per cent against the dollar to 109.6 yen, a three-month high, taking its gains to more than one per cent so far this month.
According to the latest Commodity Futures Trading Commission data, speculators have further raised their net long dollar bets, including those against the yen.
Mr Trump said on Wednesday that China "broke the deal" reached in talks with the United States, and vowed not to back down on raising tariffs or imposing new ones unless Beijing "stops cheating our workers". REUTERS