Forex – Yen Gains after China Exports Drop, Dollar Dips

© Reuters. – The safe haven yen strengthened and the Australian dollar fell on Monday after data showing that China’s exports unexpectedly fell in December, pointing to further weakness in the world’s second-largest economy and deteriorating global demand.

was down 0.42% at 108.08 by 02:51 AM ET (07:51 AM GMT).

the most in two years in December, while imports also saw a shock drop.

A separate report showed that China posted its biggest trade surplus with the U.S. on record in 2018, which could prompt President Donald Trump to turn up the heat on Beijing in their bitter trade dispute.

The risk sensitive Australian and New Zealand dollars were both lower, with down 0.39% to 0.7185 and shedding 0.47% to trade at 0.6798.

Both currencies had gained around 1.5% versus the dollar last week as risk sentiment improved on hopes for both a U.S.-Sino trade deal and more aggressive stimulus from Chinese policymakers to support its ailing economy.

“Given the support we had seen in commodity currencies, it is reasonable to see profit booking. I expect the uptrend to resume soon,” said Michael McCarthy, chief markets strategist at CMC Markets.

The dollar edged lower against a basket of the other major currencies amid heightened investor expectations that the Federal Reserve will not raise rates this year

The , which measures the greenback’s strength against a basket of six major currencies, was last at 95.21.

After a stellar 2018, in which the greenback gained 4.3% due to the U.S. central bank hiking rates four times, investors now expect the Fed to halt its monetary tightening policy.

Market participants think that worries of slowing domestic and global growth as well as tame U.S. inflation will make Fed policymakers hesitant to raise borrowing costs in the world’s largest economy.

Fed Chairman Jerome Powell reiterated last week that the U.S. central bank has the ability to be patient on monetary policy given that inflation remains stable.

Data on Friday showed that U.S. consumer prices in December fell for the first time in nine months in December.

The euro was holding steady, with changing hands at 1.1471.

The pound edged lower, with dipping to 1.2832 at the start of what is expected to be a highly volatile week.

Prime Minister Theresa May must win a vote in parliament on Tuesday or risk a chaotic exit for Britain from the European Union. The numbers are not in May’s favor and her chances of winning the vote look extremely slim.

“The market is widely expecting the vote not to pass through parliament. Upside in sterling looks capped at $1.2940,” added CMC’s McCarthy.

— Reuters contributed to this report.

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