The yen and Swiss franc gained on Friday as investors sought safe-haven currencies due to concerns over the US-China trade dispute, political uncertainty in Italy and weak economic data around the world.
Deep liquidity and current account surpluses in Japan and Switzerland attract safe-haven flows to their currencies during times of geopolitical and economic stress.
“The strength of the yen will not be welcomed by the BOJ [Bank of Japan], which continues to struggle to push Japanese CPI inflation toward its 2 percent goal,” said Jane Foley, a senior foreign-exchange strategist at Rabobank NV in London.
The yen soared to a seven-month high against the US dollar.
“The recent escalation in trade wars between the US and China suggests there is potential for robust demand for safe-haven assets going forward and this implies ample scope for a firmer yen,” she added.
The same holds true for the Swiss franc, Foley said, with the economy also in a much better budget position than Japan.
US stocks fell sharply after US President Donald Trump on Friday said that he was not ready to make a trade deal with China and had decided that the US would not do business with Chinese telecoms giant Huawei Technologies Co (華為) for the time being.
Also on Friday, data showed that underlying US producer prices fell 0.1 percent last month, suggesting inflation remained muted, and Canada’s economy lost 24,200 jobs.
In the UK, the economy shrank for the first time since 2012 in the second quarter and sterling slid to a 31-month low against the US dollar.
“Take your pick. You look around the world, all the data were negative or at least concerning,” said John Doyle, vice president for dealing and trading at Tempus in Washington. “Of course, you’re going to see an uptick in the Swissie [franc] and the yen.”
A selloff in Italian bonds after the League party called for a vote of no confidence against its own governing coalition also added to the global tension.
The party’s populist chief, Matteo Salvini, hopes that the move will trigger early elections and install him as the new leader.
The US dollar weakened against a basket of currencies, pressured as Trump repeated his call for a weaker currency to help US manufacturers.
Trump told reporters at the White House he believes the US Federal Reserve needs to lower interest rates by a full percentage point.
In afternoon trading, the US dollar fell 0.2 percent against a surging yen to ￥105.68, after earlier dropping to a seven-month low of ￥105.25.
The yen posted its second weekly gain versus the US dollar, up 0.9 percent, and its third weekly rise versus the Australian and New Zealand dollars.
In Taipei, the New Taiwan dollar rose against the greenback on Thursday, gaining NT$0.124 to close at NT$31.363, little changed from last week’s NT$31.376. Markets were closed on Friday due to Typhoon Lekima.
The Swiss franc rose versus the US dollar and euro on Friday.
The US dollar fell 0.3 percent at 0.9723 franc, down 1 percent for the week, while the euro slipped 0.1 percent at 1.0892 francs.
The euro rose 1 percent against the US dollar to US$1.13, showing little reaction after Salvini called for early elections. The common currency is up 1.6 percent against the greenback for the week.
The US dollar index fell 0.6 percent to 97.03, posting its biggest weekly decline since June 21 and falling 1 percent for the week.