© Reuters. FILE PHOTO: Illustration photo of the US Dollar-and Yen-notes
By Jemima Kelly
LONDON (Reuters) – The dollar buckled against the yen on Friday, as tensions boiled on the Korean Peninsula, although the sharp divergence between US and Japanese monetary policy kept the greenback on track for a winning week against the yen.
North Korea said on Friday it will test a hydrogen bomb over the Pacific ocean, could, after US President Donald Trump said that he would destroy the country if it threatened the United States or its allies.
Add investors ‘risk-aversion was the S&P Global Ratings’ downgrade China’s sovereign credit rating. On Friday, the Rating Agency said that the country is trying to reduce the risks of its rapid build-up of debt is not as fast as expected, and loan growth is still too fast.
The dollar fell as much as 0.8 percent to 111.65 yen , before recovering to trade down to a half a percent on the day at 111.96 yen in early London trade.
The yen tends to benefit in times of crisis by Japan and the net-creditor nation status, and the expectation that Japanese investors would be the repatriation of assets.
“Many are questioning whether this can remain the case in the presence of a risk is an event that was local to Japan,” wrote RBC Capital Markets analysts in a note to clients.
“We find the almost perfect symmetry in the way the yen is responding to Asia-specific shocks and to shocks, which suggests elsewhere, what it can (remain a safe haven),” they added.
For the week, the dollar was still more than 1 percent against the yen, after it scaled a two-month high of 112.725 after the US Central Bank signalled that it is still on course, interest rates to increase until the end of the year, and after the Bank of Japan kept its bond-buying promise.
The dollar index, which tracks the U.S. unit against a basket of six major rivals, fell 0.3 percent to 92.024 (DXY), but it was still slightly higher on the week and was far beyond his more than 2-1/2-year low of 91.011 marked on Sept. 8.
It surged to its strongest in 15 days on Wednesday, but has since slipped to 1 percent.
“If retailers were hoping for a strong US dollar rebound in the Wake of this week’s Fed meeting, the first response was certainly encouraging (but), moreover, that the resonance is not just intoxicating,” said CMC Markets analyst Michael Hewson.
To deliver “even if the Federal Reserve were able, to a December rate rise, there is so much uncertainty about what will look the FOMC (Federal Open Market Committee), in six months’ time,…, all the forecasts for a further three rate rises in the year 2018 must be treated with a huge amount of caution.”
The euro climbed half a percent to $1.1992 and was also up 0.1 percent for the week, with merchants, not to see, on Sunday, the elections in Germany as a danger. German Chancellor Angela Merkel is widely expected to win a fourth term in power.