USD/JPY has resumed its downward trend on Monday. In the North American session, the pair is trading at 109.20, down 0.69% on the day. It’s quiet on the release front, with no U.S. events. In Japan, today’s highlight is current account, which is expected to fall to JPY 1.71 trillion.
The yen hasn’t received much help from economic conditions or Bank of Japan policy, but the currency has taken full advantage of rising tensions between the U.S. and China. The Japanese currency has gained 0.8% on Monday, and has climbed 2.6% in May, as risk appetite has sagged and investors have snapped up the safe-haven Japanese currency. On Friday, the U.S. raised tariffs on $200 billion in Chinese goods, from 10% to 25%. The move was announced a week ago, and sharp declines in the equity markets have boosted the yen. On Monday, China retaliated, announcing that it would slap tariffs on $60 billion of U.S products.
Despite the dramatic rise in tariffs and the Chinese promise to retaliate, talks between the sides continue, with officials scheduled to meet in Beijing. The new tariffs do not apply to Chinese goods that left port prior to May 10, affording a 2-week window for negotiators before the tariffs take effect. The escalation in tensions has shelved a meeting between President Trump and Chinese President Xi, but the two leaders could meet at the G-20 summit in Japan in June.