Asian currencies show restrained dynamics, yen grows on fears of new Trump's duties
On Monday, most Asian currencies moved in a narrow range amid a decline in risk appetite due to fears of tougher trade duties with the possible return of Donald Trump to the White House.
The Japanese yen, which strengthened due to demand for safe-haven assets, and the Chinese yuan, supported by positive business activity index (PMI) data, stood out.
The US Dollar failed to capitalize on strong PCE inflation data on Friday as investors assess the potential impact of Trump's new tariffs on the US economy. The dollar index (DXY) and its futures lost about 0.2% in the Asian session.
According to The Wall Street Journal, the Trump administration is considering imposing tougher and more sweeping duties against key U.S. trading partners. It is expected that the new measures could be announced as early as April 2.
Additional pressure on the markets comes from fears of recession in the US: analysts at Goldman Sachs estimate the probability of economic slowdown in the next 12 months at 35%.
Yen grows on demand for protective assets
The Japanese yen showed the best dynamics in Asia: the pair USD/JPY declined by 0.5% to 148.73 yen.
The yen growth is due to the increase in demand for safe-haven assets, as well as expectations of further tightening of the Bank of Japan (BOJ) monetary policy.
The sentiment was supported by statements of BOJ representatives about possible new rate hikes on the background of stable inflation. At the same time, macroeconomic statistics turned out to be ambiguous:
- Industrial production in February exceeded expectations
- Retail sales grew weaker than forecasts.
Yuan strengthens on positive PMIs
The Chinese yuan rose slightly: USD/CNY declined by 0.1%.
The currency was supported by optimism after the release of PMI indices for March, which exceeded expectations. This boosted hopes for China's economic recovery thanks to stimulus from the authorities.
However, Trump's potential new duties remain a key risk for the yuan. The former US president has previously already imposed 20% duties on a number of Chinese goods, and additional measures could be announced on April 2.
Other Asian currencies
Trading in the region was sluggish due to Ramadan celebrations in several South and Southeast Asian countries.
The Australian dollar (AUD/USD) was down 0.2% ahead of Tuesday's Reserve Bank of Australia (RBA) meeting. Rates are expected to remain unchanged, but the regulator's tone could become less tight amid a slowing economy.
The South Korean won (USD/KRW) weakened 0.1% despite strong industrial production data.
Markets continue to monitor developments on trade restrictions and global growth prospects.