Press "Enter" to skip to content

FOREX-Yen strengthens as worsening Sino-US relations…

By Olga Cotaga

July 24 – The Japanese yen rose to a one-month high while the euro’s gains paused as traders waited for flash Purchasing Managers’ Index readings for July across major developed economies.

The eurozone Markit Composite flash PMI comes at 0800 GMT. Economists polled by Reuters expect the index to rise to 51.1 from 48.5, a sign of return to growth. British PMIs are due at 0830 GMT and the United States follows later in the day.

The euro has already enjoyed a winning streak for all of July, rising by 3.3% above $1.16, as the European Union’s passing of a 750 billion-euro recovery fund restored confidence.

The euro was flat at $1.1598, with the U.S. dollar losing some of its appeal as a safe haven, making room for the Japanese yen to rise.

The yen was last up 0.6% at 106.25, its highest since June 23, after China’s foreign ministry told the U.S. embassy early on Friday to close its consulate in the city of Chengdu, after Washington ordered the closure of the Chinese consulate in Houston.

“Typically when we would be entering into more of a risk- averse posture, the dollar would strengthen,” said Shannon Saccocia, CIO at Boston Private Wealth. But because the United States has managed the coronavirus pandemic worse than Europe or China, “it seems like there is more promise outside of the United States.

“I think we’re going to continue to see pressure on the dollar” as expectations of a steadier return to growth diverge between the United States and the rest of the world, Saccocia said.

Sino-U.S. ties have deteriorated over issues ranging from the COVD-19 pandemic, which began in China, to Beijing trade and business practices, its territorial claims in the South China Sea and its clamp-down on Hong Kong.

Markets have been relieved that so far China and the United State have not abandoned their trade deal, but they are beginning to view that as a real risk.

The Chinese yuan, a barometer of Sino-U.S. tensions, looks set for its worst week in three months. It last was down 0.2% at 7.0276 per dollar in the offshore market.

Elsewhere, the British pound fell 0.2% versus the dollar and the euro, to $1.2721 and 91.19 pence respectively.

Focus is also on the next U.S. fiscal rescue package, which is deadlocked in Congress with some unemployment benefits due to expire at the end of the month.

(Reporting by Olga Cotaga, editing by Larry King)

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *