Dollar slips versus yen as trade tensions cloud outlook

© Reuters. Dollar slips versus yen as trade tensions cloud outlook

By Masayuki Kitano

SINGAPORE (Reuters) – The dollar eased against the yen on Wednesday, with the outlook clouded by worries that escalating U.S.-China trade tensions could exert a toll on the global economy and U.S. growth.

The dollar fell 0.1 percent to 106.50 yen , giving back some of the gains made on Tuesday, when it rose 0.6 percent against the Japanese currency.

The greenback gained on the yen the day before as risk appetite improved and Wall Street’s main indexes advanced, helping the U.S. currency stabilize after recent declines.

Considered a safe haven currency, the yen attracts demand in times of economic uncertainty. On the flip side, it often weakens when investors’ appetite for riskier assets improves.

The U.S. gained nearly 1.3 percent on Tuesday while (NASDAQ:) shares jumped on bets that criticism from President Donald Trump would not translate to policy changes.

The outlook for the dollar, however, remains murky due to global trade tensions. The greenback has lost about 2.2 percent against a basket of six major currencies so far this year.

The Trump administration on Tuesday raised the stakes in a growing trade showdown with China, announcing 25 percent tariffs on some 1,300 industrial technology, transport and medical products to try to force changes in Beijing’s intellectual property practices.

China’s commerce ministry said on Wednesday it “strongly condemns and firmly opposes” the proposed U.S. tariffs following the Section 301 probe and will take counter measures.

The persistent worries over global trade tensions are likely to weigh on the dollar against the yen, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

“The dollar will probably be weighed down, and a rise towards 108 yen seems unlikely,” Okagawa said.

At the same time, dollar-selling needs among Japanese players have abated now that Japan’s end-March financial year-end is out of the way, and that could limit the dollar’s downside risk, said Okagawa, who expects the dollar to trade in a 104 yen to 108 yen range in the near term.

Against a basket of six major currencies, the dollar last traded at 90.133 (), having edged back from Tuesday’s near two-week high of 90.275. Analysts say investors are also focused on U.S. payrollsdata and comments by Federal Reserve Chairman Jerome Powell later this week, which should help determine the dollar’s direction.

The euro edged up 0.1 percent to $1.2274 (), regaining some footing after slipping 0.3 percent on Tuesday. The common currency had retreated on Tuesday after a survey showed the euro zone’s manufacturing boom faltered for a third month in March, although output remained robust.

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