USD/JPY bearish as trade talks look set to fail

Japanese Yen Strengthens as Hopes of a Trade Deal Fade

Posted Thursday, October 10, 2019 by
Arslan Butt • 1 min read

The Japanese yen is making gains against the US dollar over the possibility that the upcoming US-China trade talks could fail to make progress towards a trade deal. At the time of writing, USD/JPY is trading at around 107.47 after the recent deputy-level talks between the two countries concluded without any significant positive developments.

According to a report on South China Morning Post, unnamed sources let on that the discussions failed to make much headway on key issues and that Chinese Vice Premier Liu He was planning to leave Washington a day sooner than previously planned. The trade teams avoided key issues of forced technology transfers and state subsidies by Chinese government.

Liu is expected to meet with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday but plans to leave on Friday, holding meetings for only one day instead of two days as planned initially. A prolonged trade war could cause further slowdown on the global economy and increase uncertainty in markets.

Safe havens like the Japanese yen and gold gain in times of uncertainty when investors prefer to shift their focus away from riskier assets like stock markets and riskier currencies. In case the latest trade talks fail to make progress, Trump’s latest tariff hike from 25% to 30% on $250 billion worth of Chinese imports will be implemented early next week.

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