USD/JPY registers biggest single-day drop in two-years, risk-off favor deeper slide

USD/JPY pair fell 1.3% on Thursday, the biggest single-day drop since May 17, 2017. 

The Japanese Yen picked up a bid as President Trump ratcheted up the Sino-US trade war with more tariffs, triggering a flight to safety. 

President Trump announced Thursday that the US will impose a new 10% tariff on $300 billion worth of products imported from China, saying Beijing is not living up to the promises it made in recent trade negotiations. 

The US equities reposed by falling 1% with the Dow Jones Industrial Average shedding 280 points. As a result, the anti-risk Japanese Yen pushed higher across the board. 

The risk aversion seems to have hit the Asian shores. As of writing, shares in Australia and New Zealand are reporting 0.55% and 0.20% losses, respectively. South Korea’s Kospi is also down 1% and Japan’s Nikkei is shedding almost. 2%.  

Also, escalating trade tensions could put pressure on the US Federal Reserve (Fed) to deliver more interest rate cuts in the near future. The central bank cut rates by 25 basis points on Wednesday, the first rate cut since 2008. 

The Yen, therefore, could continue to push higher against the US dollar during the day ahead. As of writing, the USD/JPY pair is trading at 107.34, having clocked a session high and allow of 107.57 and 107.22, respectively. 

BOJ minutes reiterate dovish stance

The minutes of Bank of Japan’s July meeting released a few minutes before press time showed consensus among members that persistent easing is appropriate, and necessary to achieve the 2% price objective. One member called for close monitoring of the side effects of ultra easing. 

The minutes barely offered hawkish or dovish surprises, leaving the USD/JPY at the mercy of the broader market sentiment which is currently positive for the JPY. 

Pivot levels