What you need to know:
Yen advances, dollar holds losses
> Japan sovereign debt yields jump on BoJ speculation.
> Global trade worries mount.
> Regional equities choppy.
The Japanese yen strengthened and the US dollar held its losses as concerns over global trade tensions kept markets jittery.
The Japanese currency, often regarded as a haven during geopolitical uncertainty, climbed 0.4 per cent to ¥110.91 per dollar, after gaining close to 1 per cent on Friday, and amid speculation over a change in Bank of Japan policy.
The US dollar index, which measures the greenback against a basket of peers, was down 0.2 per cent after slumping on Friday.
The moves came after G20 finance ministers and central bank governors, meeting in Argentina over the weekend, warned that increasing trade tensions risk undermining the global economy.
Fresh concerns on Friday about the prospect of a global trade war further unsettled financial markets after President Donald Trump said he was ready to slap tariffs on all Chinese imports to the US.
The latest threat followed his criticism on Thursday of the Federal Reserve’s recent interest rate rises.
“Fears of a full-fledged currency war are elevate… and all attention will be on China’s financial markets,” ANZ analysts said on Monday.
China’s offshore renminbi exchange rate was up 0.1 per cent at Rmb6.7675 per dollar. The onshore renminbi, which moves within a trading band of 2 per cent in either direction from a midpoint, was up 0.3 per cent at Rmb6.7476.
The People’s Bank of China injected $74bn into the banking system on Monday via loans to commercial banks, the latest sign Beijing is easing monetary policy as the economy slows.
The New Zealand dollar was up 0.1 per cent against the greenback at $0.6811 while the Australian dollar was flat at $0.7424.
Japanese sovereign bond yields, which move inversely to prices, rose after speculation about potential changes to the country’s central bank policy. The 10-year Japanese government bond yield was up 5 basis points at 0.071 per cent, near its highest point since February.
Reuters, citing people familiar with the Bank of Japan, reported on Friday that policymakers had been in “unusually active discussions” ahead of this month’s monetary policy meeting, suggesting possible changes to interest rate targets and asset-purchase programmes.
“Some at the Bank of Japan are expressing increasing concern about unwelcome side-effects of prolonged ultra-loose monetary policy,” said Capital Economics senior Japan economist Marcel Thielant. “We aren’t convinced that those concerns justify any change in the policy stance at the moment, but it is worth asking whether they could become more pressing issues in future.”
The yield on US 10-year Treasuries was flat at 2.889 per cent while that on equivalent Australian government bonds rose 5 basis points to 2.659 per cent.
Asia-Pacific equities were choppy as trade worries persisted.
The CSI 300 index of major Shanghai and Shenzhen stocks dipped as much as 0.7 per cent before recovering to be up 0.2 per cent.
In Hong Kong, the Hang Seng China Enterprises index was up 0.5 per cent, recovering from an initial 0.1 per cent dip, while the broader Hang Seng index gained 0.2 per cent.
Hong Kong-listed shares in Russian aluminium producer Rusal jumped as much as 15.5 per cent after US Treasury secretary Steven Mnuchin on Friday suggested the White House was open to finding a solution to sanctions placed on the company.
In Sydney, the S&P/ASX 200 was down 0.9 per cent with only energy stocks in positive territory, and with the key financials and basic materials segments each declining 0.9 per cent.
In Tokyo the Topix was off 0.4 per cent despite a 2.1 per cent gain for the financial segment, while in Seoul the Kospi Composite slid 0.6 per cent.
Oil prices eased, with Brent crude down 0.1 per cent at $72.99 a barrel and West Texas Intermediate also off 0.1 per cent at $68.17. The price of gold was a touch higher at $1,232 an ounce.