Risk Wobbles

The dollar eased 0.1 percent to 111.00 yen JPY=, hovering near a low of 110.85 yen set on Monday, its weakest level since mid-September.

The trough hit on Monday marked a drop of about 3.4 percent from the dollar’s near eight-month high of 114.735 yen set in early November.

Worries about potential delays in the implementation of U.S. tax cuts and the possibility of proposals being weakened have weighed on the greenback in recent weeks.

At the same time, the yen has been supported as risk sentiment has faltered, partly due to weakness in Chinese equities in recent trading sessions.

“The China wobble is not helping global sentiment,” said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.

“China clamping down on … a lot of the shadow banking is a good thing for the long-term, but obviously, there’s going to be a bit of a meltdown in the short term,” Innes said.

Since the low-yielding yen is often used as a funding currency for investment in riskier assets, it tends to be bought back when risk sentiment sours.

Reuters

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Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes