The Japanese yen rose to a five-week high against the greenback and a 2-1/2-year tip versus the pound on Friday, after U.S. President Donald Trump broke a term in the Sino-U.S. trade conflict, reinforcing the demand for safe-havens.
Trump said he would levy an additional 10% tariff on $300 billion worth of Chinese products on Sept. 1 after U.S. mediators returned from trade discussion in Shanghai, saying China had failed to purchase large portions of U.S. agricultural products as committed.
China’s onshore yuan sank to its weakest since November 2018 as Trump’s new levies would end a recent halt in a trade war that has pressured Chinese legislators to unleash incentive to balance its slowing economy.
The British pound edged toward a 30-month low against the greenback on account of persistent fears about a no-deal Brexit and a reduction in the Bank of England’s economic projections.
Trump’s surprise declaration sent shockwaves through global financial markets and wiped out the greenback’s recent plunge against the yen, made after U.S. Federal Reserve Chairman Jerome Powell showed the central bank was not getting into a prolonged easing cycle.
An escalation in the trade spat between the world’s two most prominent economies threatens to bring additional buoyancy to shares and bond yields, which could weigh on the dollar and currencies from commodities exporters that do business with China.
Against the greenback, the yen surged to 106.84, its strongest since June 25, before trimming gains to trade at 107.06.
For the week the greenback was on course for a 1.5% drop against the yen, its largest weekly slump since January.
The benchmark 10-year U.S. Treasury yields US10YT=RR fell to 1.8750% in Asian trading, its weakest since November 2016 and the first time it has dropped below the technically vital 2% level over two years.