Yen Hits Four-Month High as Skepticism Grows Over Trump Policies

  • The Japanese yen rose to its highest level in four months against the dollar on Wednesday in Asia, prompted by greater skepticism among investors about whether President Donald Trump will be able to stimulate the U.S. economy.
  • The potential for trade friction following a weekend meeting among the Group of 20 industrialized and developing nations also clouded the global economic outlook and boosted the appeal of the yen, a safe-haven asset in times of economic uncertainty. At the request of the U.S., finance ministers in the G-20 dropped a longstanding clause criticizing protectionism.
  • The yen rose against the U.S. dollar in the hours immediately after Mr. Trump’s election victory, then fell sharply on expectations for an economic-stimulus policy in the Trump administration.
  • The president has promised to introduce tax cuts and spur $1 trillion in spending on U.S. infrastructure construction, but he hasn’t outlined a detailed plan.
  • Expectations for the changes began to weaken after Mr. Trump struggled to round up support for a health-care bill headed for a vote this week in the Republican-led House.
  • Japanese Finance Minister Taro Aso on Wednesday said Tokyo should maintain close communication with the U.S. and continue its efforts to keep the yen stable. “Excessive sharp movements, up or down, could have a considerable impact on the economy,” Mr. Aso said in Parliament. He brushed aside speculation Washington might pressure Tokyo to guide the yen higher.
  • Until recently, the widening interest-rate gap between the U.S. and Japan was supporting the dollar. The Federal Reserve has been raising rates while Japan’s central bank has been keeping the yield on 10-year government bonds close to zero. However, when the Fed raised its benchmark rate last week, its projections for further tightening disappointed some investors who had bet on a faster tightening pace. That led to drops in Treasury yields and some dollar selling.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s