The dollar slipped to a 16-month low against the Japanese yen on Monday, pressured by lingering fears of a global trade war and caution towards political developments in Tokyo. The US currency traded at 104.835 yen after falling to 104.560, its weakest since November 2016. The dollar had already slumped 1.2 percent versus its Japanese peer last week as escalating trade tensions between the United States and China stoked concerns about global growth.
Global markets were shaken after US President Donald Trump moved to impose tariffs on Chinese goods, edging the world’s two largest economies closer to a trade war. Views that Japan’s political scandal could deepen was also seen lifting the yen, with a key figure in a cronyism scandal gripping Prime Minister Shinzo Abe due to testify in parliament on Tuesday. Economic measures dubbed “Abenomics” initiated by Abe has been a factor that has pulled the yen down over the past few years to the benefit of exporters. Any event that leads to a decline in the premier’s support ratings is seen weakening his ability to keep Abenomics in place.
“With worries about the United States and China locking horns on trade issues and Japan’s parliamentary testimony coming up on Tuesday, few participants are willing to buy the dollar,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities. “It really is typical ‘risk off’ trades dominating right now, with the yen and Swiss franc the big beneficiaries. But more speculators are jumping in, and any reversals could be sudden and violent.”
The Swiss franc was little changed at 0.9467 franc per dollar after gaining 0.55 percent against the greenback last week. The euro edged higher at $1.2364 after rising 0.5 percent last week. The dollar index against a basket of six major currencies was steady at 89.453 and in close reach of a one-month low of 89.356 set last week. The Australian dollar added 0.3 percent to $0.7714 and the New Zealand dollar gained 0.35 percent to $0.7250.