Photographer: SeongJoon Cho/Bloomberg

Yen Leads Gains Among G-10 Peers as Geopolitical Tensions Simmer

  • Dollar-yen breaches 110.00 for first time since November
  • Focus on North Korea, Syria as Tillerson heads to Russia

The yen extended gains versus all of its G-10 peers amid geopolitical tensions over North Korea and Syria.

“There’s an undercurrent of risk aversion in the markets,” giving the yen a bit of a haven boost, Scotiabank’s Chief FX Strategist Shaun Osborne said in an interview. Liquidity dwindled ahead of the Easter holiday as traders sought to avoid risky positions until flows return to more normal levels, traders in Europe and London said earlier. The Bloomberg dollar index was down for a second day, with losses of about 0.3 percent, as U.S. Treasury yields and stocks fell.

  • U.S. officials said Syria was clearly behind a chemical attack that prompted President Trump to order air strikes last week, while Secretary of State Tillerson said Russia must abandon its support of Syrian President al-Assad’s regime.
  • Earlier today, Trump tweeted that if China fails to act on the “North Korean problem,” the U.S. will do so without China. Kyodo News reported that the U.S. is said to have briefed Japan about an option to strike North Korea if China doesn’t increase pressure on the country to curb nuclear and missile programs.
  • USD/JPY trading near session low at 109.62, reached as the 10Y UST yield fell below 2.30%. The pair traded below 110.00 for the first time since November. On a closing basis, a break in dollar-yen below 109.90 would “tip the balance toward more dollar softness,” Osborne said.
  • The approach of the first round of the French presidential election on April 23 throws a level of caution into euro positioning even as German ZEW investor confidence data Tuesday showed the strongest reading in two years.
  • EUR/USD trading at ~1.0607 after rising to a high of 1.0630. Offers to sell EUR are positioned all the way to 1.0650, albeit with some light stop-loss buy orders above the session high.
  • The dollar is also trading on its back foot after Fed Chair Yellen signaled no significant urgency to raise rates in a speech Monday. The longer-term outlook that includes potentially higher rates from the Fed favors the dollar and may see buyers return after the Easter break, one trader said.
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