【Dollar/Yen Exchange Rate】Last week's market and this week's outlook
【Dollar/Yen Exchange Rate】Last Week's Market and This Week's Outlook
Last week's USD/JPY movement saw the dollar test the downside for the fourth week in a row, but over the course of the week the trend was toward dollar buying and yen selling. On the 13th the dollar fell below the recent low of 109.4 yen touched on the 9th, briefly dropping to around 109.0 yen, but by the weekend of the 17th it had risen to 110.0 yen.
Because US-China trade talks were tense and raised expectations of tariff increases, the dollar weakened to 109.0 yen on the 13th; however, President Trump and US Treasury Secretary Mnuchin continued to express a positive stance toward dialogue with China, and better-than-expected US indicators—May New York Fed manufacturing index on the 15th rising unexpectedly, May Philadelphia Fed manufacturing index on the 16th also rising more than expected, and April housing starts increasing—have kept the dollar strong as a factor supporting buying.
In the US-China trade talks, on the 13th the Office of the US Trade Representative disclosed a list that would apply a tariff of up to 25% on about $300 billion of imports from China. Excluded are items such as medicines and certain rare earths, but parts for iPhones, MacBooks, and iPads produced in China by companies like Apple would be subject to tariffs.
Additionally, to shield US companies that import parts and materials from China from the impact of stronger tariffs, a public comment period is set until June 24 to gather opposing views from domestic US companies. Actual tariff increases would occur after that. China also announced it would retaliate against the US tariff increases, declaring on June 1 it would impose tariffs on $60 billion of US imports. China has also cancelled orders for more than 3,200 tons of US pork.
By no later than the G20 Osaka Summit on June 28-29, a US-China leaders’ meeting is planned to take place, and attention is on whether US-China trade talks resume and efforts towards reaching an agreement will be made by then.
Furthermore, on the 16th the US government added Huawei and 68 related Chinese companies to the Entity List, prohibiting purchases of parts and other items by US companies without government authorization. Stocks of Japanese and US companies supplying components and software to Huawei (such as Qualcomm, Intel, Oracle, Murata Manufacturing, Mitsubishi Electric, Sony, etc.) have fallen. However, Huawei is reportedly stockpiling 6-12 months worth of related components from the US to mitigate production impact in the near term.
Towards Europe and Japan, President Trump stated on the 17th that he would postpone any decision on additional tariffs for cars and auto parts for up to 180 days. Specifically, within 180 days he directed negotiations with Europe and Japan toward a trade agreement.
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