SINGAPORE- The yen was investors’ safe harbor of choice on Tuesday and it traded near five-month highs as fears about a tariff-driven slowdown in US growth have rattled US stocks and the dollar.
The Nasdaq fell 4 percent overnight and the S&P 500 slid 2.7 percent as equities caught up with a big rally in US bonds, moving on the risk that US economic growth slows down.
The yen touched a five-month peak of 146.625 per dollar and was last trading at 146.85.
Other moves in the currency market were more muted, but the lack of flight to the dollar – which has been sinking in recent weeks – was noteworthy, according to analysts.
The overnight drop in the risk-sensitive Australian dollar was a modest 0.4 percent and it last bought $0.6272. Sterling was holding on above its 200-day moving average at $1.2875 and the euro was steady just above $1.08.
There were falls in the Canadian dollar and Mexican peso – the economies whose exports are to bear the brunt of US tariffs – but they were modest.
The Canadian dollar was last steady around C$1.44 per dollar and the peso was at 20.34 per dollar. China’s yuan was steady at 7.26 per dollar in early offshore trade on Tuesday.
“Historically, the dollar outperforms when we get a solid rise in volatility, but when the US economy and US equity market is the central point of concern, this is now limiting the attractiveness of the dollar,” said Chris Weston, head of research at broker Pepperstone in Melbourne.
The turmoil in equities seemed to be triggered by a Donald Trump Fox News interview, in which the president talked about a “period of transition” and declined to predict whether his tariffs on China, Canada and Mexico would result in a US recession.
