Yen rises as investors flock to safe-haven assets

London

THE Japanese yen rose and 10-year Treasury yields fell on Tuesday as investors fled to safer assets amid worries the US-China trade conflict would get worse, days after both sides announced new tariffs.

On Friday, China said it would increase tariffs on US$75 billion worth of American goods. The United States retaliated by saying it would raise existing tariffs on US$250 billion worth of Chinese goods to 30 per cent from 25 per cent on Oct 1. US President Donald Trump also said he would tax another US$300 billion worth of Chinese imports 15 per cent, rather than the 10 per cent he had planned. Those levies go into effect on Sept 1.

On Monday, speaking on the sidelines of the G-7 summit of world leaders in France, Mr Trump said Chinese officials had contacted US trade counterparts overnight and offered to return to the negotiating table.

Mr Trump's comments sparked a wave of so-called risk-on trades, which initially boosted the US dollar, weakened safe-haven currencies, and lifted stock markets.

The Japanese currency was last up 0.3 per cent at 105.755 against the dollar. That wasn't as strong as Monday's gain, when it reached a three-year high. The yen has gained 3.5 per cent against the dollar this year as the trade war drives traders to safe-haven assets.

Ten-year US Treasury yields fell to 1.5030 per cent, keeping the yield curve inverted as two-year yields traded at 1.5182 per cent, a sign of an impending recession.

The offshore Chinese yuan, sensitive to US-China trade disputes, was steady on Tuesday after plunging to a record low of 7.1870 against the dollar the day before. It last traded at 7.1694.

Elsewhere, major currencies were relatively stable. The euro was trading at US$1.1103 as market participants looked for signs of whether talks between Italy's Five Star Movement and the Democratic Party would result in the formation of a coalition government.

The dollar index, which tracks the dollar against six other currencies, was down 0.2 per cent at 97.919.

The pound was up 0.4 per cent at US$1.2268 and by the same amount against the single currency at 90.51 pence as Britain's opposition Labour Party leader Jeremy Corbyn said he would do everything necessary to prevent Britain leaving the European Union without a divorce deal on Oct 31. REUTERS