Yen, Franc Rise on Fed Rate Hike Impact Worries Before ISM Data

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TALKING POINTS – YEN, FRANC, US DOLLAR, ISM, FED, TRADE WAR

Yen, Franc rise on Fed rate hike impact worries before ISM data
Australian, New Zealand Dollar follow APAC stocks downward
Trade war fears may return as White House readies China tariffs

The anti-risk Japanese Yen and Swiss Franc were on the offensive as risk appetite deteriorated in Asia Pacific trade. On the opposite side of the G10 FX sentiment spectrum, the pro-risk Australian and New Zealand Dollars suffered outsized losses.

A parallel rise in US Treasury bond yields suggests worries about the knock-on impact of Fed tightening reemerged. Recent turmoil in emerging market assets has reflected has reflected concerns about their inability to weather a global rise in borrowing costs courtesy of the US central bank’s rate hikes.

The move may mark pre-positioning before services ISM data, where expectations point to a pickup in activity growth. Tellingly, the US Dollar produced uneven results – gaining on the commodity bloc currencies but falling against the Franc and Yen – as yield- and safety-driven considerations clashed.

Renewed trade war fears may compound pressure on risky assets. The end of the public comment period on the next round of anti-China tariffs championed by the Trump administration ends today, which may pave the way for their implementation. Some 6,000 products are targeted at a total value of $200 billion.

See our study on the history of trade wars to learn how it might influence financial markets!