Japanese Yen Rallies on Trade and Economic Growth Concerns

The  Japanese yen today rallied against the  US dollar as  investors remained worried about the  trade tensions between the  US and  China, which resulted in  a  risk averse market sentiment. Investors were also worried about the  prospects of  slower global economic growth next year, which made the  safe haven yen more appealing.
The  USD/JPY currency pair today dropped from an  opening high of  110.94 to  a  2-day low of  110.32 due to  the  stronger Japanese yen.
The  yen’s rally was largely triggered by  yesterday’s news that President Donald Trump was considering issuing an  executive order barring US companies from using ZTE and  Huawei products. This report reversed the  positive market sentiment that had been triggered by  an  earlier Bloomberg news report indicating that the  US and  China would resume trade talks early next year. The  latest news reignited investors fears that the  world’s two largest economies would not be able to  resolve their trade differences any time soon, which could drastically hinder global trade and  economic growth.
Yesterday’s weak Chinese industrial profits data also weighed on  the  US dollar as it was perceived as  evidence that global economic growth was actually slowing down. Investors are also expecting US economic growth to  slow down next year, which has markets pricing in  just one rate hike in  2019.
The  yen’s short-term performance is likely to  be driven by  market risk sentiment and  the  release of  the  US advance goods trade balance later today.
The  USD/JPY currency pair was trading at  110.41 as  at  09:25 GMT having dropped from a  high of  110.94. The  GBP/JPY currency pair was trading at  139.57 having fallen from a  high of  140.38.

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