Yen Gains Ground as Greenback Loses Luster

Fundamental analysis of Forex market

The Japanese yen has posted losses in the Friday session. In the North American session, USD/JPY is trading at 110.45, down 0.40% on the day. On the release front, Preliminary UoM Consumer Sentiment disappointed, dropping from 97.1 to 95.3 points. This missed the forecast of 98.1 points. There are no Japanese events on the schedule.

After a summer of tit-for-tat tariffs between the U.S and China, the two economic giants are scheduled to hold trade talks at the end of August. Although the talks will be held by low-level delegations, the fact that the parties are talking rather than imposing tariffs has raised hopes that trade tensions will ease. The U.S dollar has benefited from the trade war and the report of U.S-China talks has improved risk sentiment and has sent the U.S currency lower. The Japanese yen, although a safe-haven asset, has jumped on the bandwagon and posted gains in Friday trade.

The imposition of U.S steel and aluminum tariffs on Japanese exporters has soured economic relations between the two economic superpowers, and Japan has warned that it could retaliate, although Japan has refrained from slapping tariffs on U.S products. The sides met last week in Washington, but there has been no breakthrough in the impasse. Japan is still smarting from the U.S decision to withdraw from the Trans-Pacific Partnership and is intensifying efforts to reduce its economic dependence on the United States, and signed a free trade agreement with the European Union in July. Still, the U.S is Japan’s second-biggest trading partner and accounts for 19% of Japanese exports, so Japan will need to find a way to smooth relations with the unpredictable Donald Trump.