[SINGAPORE] The Japanese yen and Swiss franc strengthened against the dollar on Monday (Mar 10), as traders flocked to safe-haven currencies due to lingering worries over tariffs and a US economic slowdown, while the euro added to gains after a strong run last week.
The yen on Monday was 0.7 per cent firmer at 147.035 per dollar, having reached 146.94 on Friday, its strongest in five months.
The Swiss franc reached 0.87635 per dollar, its highest in three months.
Markets have been fixated on trade tensions after US President Donald Trump slapped tariffs on top trading partners only to delay some of them for a month amid fears of a US economic slowdown.
That has led some investors to lose faith in the US economy which has hitherto been outperforming its peers.
On currency futures markets, investors have slashed net long dollar positions to US$15.3 billion from a nine-year high of US$35.2 billion in January.
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There are also domestic factors at play in Japan.
“We still favour the JPY to outperform as we think wage discussions … should solidify the wage-inflation cycle that will keep the BOJ on a hawkish path ahead,” said Dominic Bunning, global forex strategist at Nomura.
Data on Monday showed regular pay in Japan rose 3.1 per cent in January following December’s revised 2.6 per cent increase and marking the biggest jump since 1992, though inflation at a two-year high meant real wages fell.
The Bank of Japan is widely expected to keep interest rates unchanged at its policy review on March 18-19, though officials have repeatedly cited the need to gauge the sustainability of wage growth after the central bank’s January rate hike.
Following a volatile week that saw the euro’s biggest weekly gain since 2009, the common currency edged 0.18 per cent higher against the dollar and hovered near its four-month high as the markets awaited details on the likely boost to European spending.
“We’ve seen a lot of news from Germany on defence and infrastructure, but the feeling is that there’s going to be some follow through,” said Samy Chaar, chief economist at Lombard Odier.
European Union finance ministers will meet on Monday to explore funding options for defence. European countries have rushed to boost spending and maintain support for Ukraine after Trump froze US military aid to Kyiv and raised doubts about Washington’s commitment to European allies.
Meanwhile, a survey showed on Monday that investor morale in the eurozone brightened substantially in March, with economic expectations hitting their highest reading since July 2021, boosted by Germany’s fiscal reforms.
Investors were also digesting data from Friday that showed US job growth picked up in February, but cracks are emerging in the once-resilient labour market amid a chaotic trade policy.
Eyes will now be on US inflation data due on Wednesday.
Traders are pricing in 75 basis points of cuts from the Fed this year, LSEG data showed, with a rate cut fully priced in for June.
In other currencies, the Norwegian crown gained against the dollar and the euro. It was at its strongest against the dollar since October at 10.7144 crowns to the US currency after surging inflation sowed doubts about the central bank’s plans to start cutting borrowing costs in March.
China’s yuan slipped on Monday after data over the weekend showed the consumer price index in February fell at the sharpest pace in 13 months.
The British pound steadied at US$1.2923 ahead of monthly GDP data later this week. REUTERS
