Safe-havens yen and the Swiss franc rise on global growth concerns

SINGAPORE (Reuters): The yen and the Swiss franc rose on Friday, as investors sought shelter in safe-haven assets due to renewed US-China trade tensions and weaker-than-expected data in those two economies that revived global growth fears.

Reuters reported on Thursday that the Trump administration was considering an executive order in the new year to declare a national emergency that would bar US companies from using products made by Chinese firms Huawei Technologies and ZTE.

“With the end of 90-day tariff moratorium looming ominously on the horizon, this announcement is yet another bump in the rocky path to a trade resolution,” said Stephen Innes, head of Asian trading at Oanda in a note.

Trade tension between the world’s two largest economies has been one of this year’s biggest risk factors, though Washington and Beijing on 1 December agreed to a 90-day ceasefire in their tariff dispute while they try to negotiate a durable deal.

Markets remain sceptical whether the two sides can bridge their differences, which go beyond trade to intellectual property rights and other issues.

In Asian trade on Friday, the yen added 0.4% against the dollar, while the Swiss franc tacked on 0.3% as renewed growth fears pushed investors back into safe havens.

The anxiety in markets has helped these currencies this month put on 2.3% and 1.2%, respectively.

Currencies generally are trading in thin volumes, with year-end positioning adding to volatility.

The dollar index, a gauge of its value versus six major peers, fell by around 0.15% to 96.34, after losing 0.5% overnight.

Data showing consumer confidence at its weakest in more than three years in the United States, as well as an unexpected drop in industrial profits in China, provided a stark reminder to investors of the deteriorating global growth outlook.

That came just a day after a dramatic surge on Wall Street had given some respite to battered investor sentiment. Overnight, US stocks ended higher in a volatile session.

In December, the Federal Reserve raised rates for the fourth time this year and it forecast two more rate hikes in 2019.

Financial markets are expecting US growth to slow next year as the spillover effects from rising interest rates hit corporate profits and economic activity.

For this reason, the interest rate futures market is barely pricing in just one more hike in 2019 as many traders expect the Fed to pause on its monetary tightening path if economic data weakens in coming quarters.

“There are intensifying headwinds facing the US economy in 2019 – namely the lagged effects of higher borrowing costs, the stronger dollar, the fading support from the fiscal stimulus and weaker external demand at a time of rising trade protectionism,” said James Knightley, Chief International Economist at ING in a note.

“These factors will increasingly weigh on sentiment in 2019,” he said.

Oil prices have tumbled in recent months, which has kept commodity currencies such as the Canadian dollar under heavy pressure. The loonie changed hands at C$1.3620 and has lost 7.5% of its value versus the US dollar this year.

Some analysts expect the Canadian dollar to strengthen if oil prices rebound in the new year.“The Canadian dollar was the only currency that failed to benefit at year-end because of oil but as crude prices stabilise, so will the loonie,” said Kathy Lien, Managing Director of Currency Strategy at BK Asset Management in a note.

The euro gained 0.2%, fetching $1.1452. But the single currency has struggled this year due to weak euro zone data, low inflation and political risks. That has led to the European Central Bank maintaining ultra-low interest rates. The euro is on track for a loss of 4.5% versus the greenback this year.