FX Week: JPY gains amid equity rout

Over the last week, equity markets suffered significant declines amid a sharp rise in U.S. Treasury yields and escalating investor concerns over trade disputes between the U.S. and China.

By Emirates NBD Research

Over the last week, equity markets suffered significant declines amid a sharp rise in U.S. Treasury yields and escalating investor concerns over trade disputes between the U.S. and China. In this risk averse environment, safe haven currencies such as the JPY have outperformed against the other major currencies.

Elsewhere, the USD found itself under pressure after comments from President Trump criticizing the Federal Reserve for going “crazy” with the pace of rate hikes and tightening of monetary policy. However, despite the President’s unhappiness with the central bank’s rate hikes threatening the stock market’s ‘bull run’, the Fed is likely to stay the course and we expect an additional 25bps rate hike in December. Currency manipulation will remain on the agenda with the publication of the US Treasury’s biannual report on which countries are manipulating their currencies. China is thought likely to avoid being named, but the theme of FX manipulation is likely to remain a ‘hot’ one.

At a glance:

EURUSD rises as President Trump criticizes “crazy” Federal Reserve.
USDJPY falls as the yen gains on safe haven bids amid equity declines.
GBPUSD breaks above 100-day and 100-week moving averages, with further gains likely.