Investors on Friday rushed into the perceived safety of the Japanese yen, with the currency scoring its best day against the US dollar in four months, after US President Donald Trump’s threat to impose tariffs on Mexico roiled financial markets and stoked recession fears.
Taking aim at what he said was a surge of illegal immigrants across the southern border, Trump on Thursday vowed to impose a tariff on all goods coming from Mexico, starting at 5 percent and ratcheting higher until the flow of people ceases.
The Mexican peso tumbled against the greenback, losing as much as 3.4 percent at one point, for its steepest single-day loss since October last year.
It was down 2.65 percent at 19.6485 per US dollar.
Trump’s surprise duties on Mexican imports “spurred sharp losses in the Mexican peso and a general risk-off move that strengthened the yen,” Bannockburn Global Forex LLC chief market strategist Marc Chandler said.
Several different currencies have served as safe havens during the global trade conflict, but the yen has consistently been among the strongest this year, and on Friday investors appeared to opt for the Japanese currency.
The yen increased 1.11 percent at ￥108.41 per US dollar and 0.75 percent per euro.
However, for the week, the yen was still 0.9 weaker against the US dollar.
For May, the Japanese currency gained 2.72 percent against the greenback and 3.15 percent versus the euro.
The Swiss franc also enticed safe-haven buying, rising 0.69 percent to US$1.0008, near its strongest versus the US dollar since April 10 and up 0.2 percent for the week.
In Taipei, the New Taiwan dollar on Friday fell NT$0.002 against the US dollar to close at NT$31.612, down 0.3 percent for the week.
The impact of escalating trade tensions between Washington and Beijing is starting to show up in economic data, with a key measure of Chinese manufacturing activity disappointing investors.
Trump’s latest salvo fueled a rush on Friday to safe-haven assets such as government bonds and the yen.
The US dollar has itself served as a safe haven currency in recent times, but on Friday, it fell 0.54 percent to 97.61 against a basket of other currencies, unchanged for the week.
For the month, it eked out a 0.1 percent gain, extending its winning monthly streak to four.
“The US dollar may be embarking on a major turning point,” Brandywine Global portfolio manager Jack McIntyre said.
The US dollar’s broad losses on Friday were compounded by comments from senior policymakers, with the US Federal Reserve Vice Chairman Richard Clarida on Thursday discussing the possibility of rate cuts should the world’s biggest economy take a turn for the worse, although he also said he thought the US economy is in “a very good place.”
US interest rates futures implied traders expect at least one rate cut from the Fed by the end of this year.
Additional reporting by CNA
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