Forex-Yen ticks up, Canadian dollar dips after G7 trade fracas

With the US Federal Reserve almost unanimously expected to raise interest rates for the second time this year, market focus is on the Fed's projection on the future path of interest rates.

By: Reuters | Tokyo | Published: June 11, 2018 9:45:43 am

$Canadian dollar dips after G7 trade fracas$

Canadian Prime Minister Justin Trudeau. (Source: AP)

The safe-haven yen edged higher while the Canadian dollar fell in early Asian trade on Monday after US President Donald Trump threw the G7’s efforts to show a united front into disarray following a verbal spat with Canadian Prime Minister Justin Trudeau.

The yen, which is often used as a funding currency for riskier investments and tends to gain when investors’ risk appetite sags, rose 0.15 percent to 109.40 yen on the dollar. The Group of Seven summit held in Canada laid bare a deep rift on trade and tariffs between Trump and other leaders as the US president tweeted he was backing out of the joint communique and lashed out against Trudeau.

1m 3s

G7 summit ends in disarray as Trump retracts joint statement

US President Donald Trump withdraws his endorsement of the joint communique at the end of the G7 summit - calling Canadian Prime Minister Justin Trudeau "dishonest and weak".

Trump has infuriated the European Union, Canada and Mexico by imposing tariffs on steel and aluminum imports, and the latest G7 jolt is expected to keep financial markets on tenterhooks amid fears of a global trade war. The Canadian dollar, which has been dogged by fears Trump may scrap the North American Free Trade Agreement (NAFTA), fell 0.35 percent to C$1.2975.

The Mexican peso lost 0.2 percent to 20.340 , not far from its 16-month low of 20.6505 touched on Friday. The euro was little changed at $1.1772, losing steam after having hit a two-week high of $1.1840 on Thursday. The reaction was moderate as many investors braced for a confluence of big events this week, starting with Trump’s historic meeting with North Korean leader Kim Jong Un in Singapore on Tuesday. Central banks in the United States, the euro zone and Japan will all hold their policy reviews later this week.

With the US Federal Reserve almost unanimously expected to raise interest rates for the second time this year, market focus is on the Fed’s projection on the future path of interest rates.

“I would think forecast of four rate hikes this year would be already priced in. But if the Fed suggests faster rate hikes in 2019 than previously anticipated, that could destabilise the market,” said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank. Early trade was slower than usual as Australia was on holiday.

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