Forex - Yen Gains despite Trade War Reprieve, Euro Steady

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Forex - Yen Gains despite Trade War Reprieve, Euro Steady
Credit: © Reuters.

Investing.com - The safe haven yen was higher on Wednesday despite a decision by U.S. President Donald Trump to postpone additional tariffs on some Chinese imports, as investors remained skeptical over prospects for a swift resolution to the trade spat.

The temporary reprieve in the trade war supported risk-off trades on Tuesday, but analysts warn that the optimism is already fading over a resolution to the trade war between the world’s two largest economies, which has threatened global economic growth.

Unrest in Hong Kong, worries about Brexit, and Middle East tensions mean risk aversion could quickly flare up again and roil markets.

"If we think only about the United States and China, there could be more room for dollar gains and yen losses, but this does not mean trade frictions have been resolved," said Tohru Sasaki, head of Japan markets research at JP Morgan Securities in Tokyo.

"There are still a lot of geopolitical risks, such as Hong Kong, Brexit, and the Iranian situation. I don't expect significant (risk-on) moves."

The dollar was down 0.28% to 106.42 yen by 04:00 AM ET (08:00 GMT) .

The Australian dollar also fell 0.6% to 72.15 yen while the New Zealand dollar fell 0.3% to 68.71 yen.

Against the offshore yuan , the dollar rose 0.33%.

Trump on Tuesday backed off his Sept. 1 deadline for 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods, in the hopes of blunting their impact on U.S. holiday sales.

Still, trade negotiations between the U.S. and China have progressed in fits and starts, so many investors and analysts have scaled back expectations for a resolution in the near term.

The U.S. dollar index , measuring the greenback against a basket of six currencies was little changed at 97.58 after jumping 0.4% on Tuesday.

The euro was a touch higher against the dollar at 1.1182.

The single currency showed little reaction to data showing that the German economy, the euro zone’s largest, contracted 0.1% in the second quarter, amid fallout from the trade war.

The British pound was little changed against the greenback at 1.2056.

--Reuters contributed to this report

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