Tuesday was a mixed day for the safe haven currencies after the Japanese yen plummeted in value – and the Swiss franc was labelled a “currency manipulator” by the US government.
The yen, which is known as the world’s number one safe haven currency, was down to its worst performance in eight months.
This was largely due to a rise in pro-risk sentiment, fuelled in turn by the major agreement which is due to be signed today between China and the US.
This agreement, which will put a major break on the trade battle which has plagued both countries since mid-2017, is set to be signed in the afternoon.
Traders experienced profound relief after moves towards reconciliation between the two countries emerged.
On Monday, for example, the US Treasury Department announced that it would take China off its list of currency manipulators – suggesting that this time the reconciliation is for real.
While some analysts are still sounding cautious notes due to some unaddressed issues between the nations still on the table, markets were largely positive in their response.
The yen was pushed down to a low point of 110.2 at one stage in its pair against the US dollar, although it later recovered to 110.0.
Other safe havens, however, appeared to do well out of the day.
The Swiss franc – another safe haven – was added to the US’ currency manipulation list, although this appeared to add to its value rather than detract from it.
The euro was down against the franc by 0.32% at one stage, for example.
The offshore Chinese yuan was reported at 6.884 at one stage in its pair against the US dollar.
Overall, this was a downward move.
The offshore yuan is traded internationally on the free forex markets – unlike the onshore yuan, which is controlled strongly by the Chinese government.
The single European currency, which saw a brief reprieve at the end of 2019, was down to $1.1112 in its pair against the US dollar.
This was a far cry from its performance of $1.1239, which was spotted on New Years’ Eve.
The major victor of the day was of course the US dollar, which – as outlined above – surged in many currency pairs over the course of the day.
There were two key developments for the currency on Tuesday.
One was the impending partial resolution of the trade dispute with China, while the other was a domestic data release.
A release showed that consumer price rises in the country were happening, but only at a small rate.
It also indicated that underlying inflation levels are going down on a monthly basis.
The most likely consequence of this for the markets is that the country’s central bank, the Federal Reserve, may now be able to justify keeping interest rates at their current level potentially for the whole of 2020, although this remains to be seen.
In any case, the dollar was up in several key pairs.
It was noted at a 0.1% rise against the Canadian dollar.