Chinese President Xi Jinping’s speech wherein he has promised to open up China’s economy and cut import tariffs have eased investor concerns surrounding the growing trade conflict between the two of the world’s biggest economies.
On Tuesday, with Chinese President Xi Jinping promising to cut import tariffs, investor concerns revolving around the ongoing trade conflict between two of the world’s biggest economies appear to have eased resulting in improved risk appetite which saw the U.S. dollar bounce back against the yen .
In his first public reaction to the trade standoff, Xi refrained from upping the ante between the U.S. and China, which eased worries.
The greenback was up by 0.3% at 107.130 yen after touching a high of 107.245. In the two previous sessions, the greenback had fallen with rhetoric from both U.S. and Chinese policymakers keeping market investors on their toes.
“Trade war woes have been either getting bigger or smaller every day for a while now. Today they just happened to get smaller and dollar/yen is rising in a text book manner,” said Daisuke Karakama, chief market economist at Mizuho Bank. “But we have to keep in mind that Trump’s protectionist, anti-globalisation stance won’t change overnight. His aim is to win the 2020 elections and the markets are likely to be revisited by volatility soon.”
Following Xi’s speech, equity markets in Asia have also rallied reducing the demand for the yen, which in times of political uncertainties, is sought after as a sanctuary currency.
The euro rose to 132.035 yen, its highest since March 14.
However, losses in the yen were limited since investors are concerned from risks stemming from Syria.
As per Yukio Ishizuki, senior currency strategist at Daiwa Securities, geopolitical risks are weighing on the USD against the yen midst concerns that U.S.-Russia relations could worsen over the Syria conflict.
On Monday, U.S. President Trump had promised a quick and prompt action in response to a suspected chemical weapons attack in Syria; Trump has trounced Russia for backing Syrian President Bashar al-Assad.
As for the Euro, sentiments for the currency rose following ECB President Mario Draghi statement that stock markets in 2018 have not been materially impacted by the financial conditions in the euro zone; essentially Draghi statement goes to suggest that policymakers maintain their cool despite the volatility in the market.