May 31, 2019 / 7:19 PM / 3 months ago

FOREX-Yen jumps, peso tumbles on Trump's tariff threat on Mexico

    * Trump threatens tariffs on Mexico over illegal immigration
    * Mexican peso set for worst day since October
    * Traders pile on bets on U.S. rate cuts by year-end
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, May 31 (Reuters) - Investors rushed into the perceived safety of the Japanese
yen on Friday, with the currency scoring its best day against the dollar in four months,
after U.S. President Donald Trump's threat to impose tariffs on Mexico roiled financial
markets and stoked recession fears.
    Taking aim at what he said was a surge of illegal immigrants across the southern
border, Trump vowed on Thursday to impose a tariff on all goods coming from Mexico,
starting at 5% and ratcheting higher until the flow of people ceases.
    The Mexican peso tumbled against the greenback, losing as much as 3.4% at one point,
for its steepest single-day loss since October. It was down 2.65% at 19.6485 per dollar.
    Trump's surprise duties on Mexican imports "spurred sharp losses in the Mexican peso
and a general risk-off move that strengthened the yen," said Marc Chandler, chief market
strategist at Bannockburn Global Forex LLC.
    Several different currencies have served as safe havens during the global trade
conflict, but the yen has consistently been among the strongest this year, and on Friday
investors appeared to opt for the Japanese currency.
    The yen increased 1.11% at 108.41 per dollar and 0.75% per euro.
    For May, the Japanese currency was on track to gain 2.72% against the dollar and 3.15%
versus the euro.
    The Swiss franc also enticed safe-haven buying, rising 0.69% at $1.0008, near its
strongest versus the dollar since April 10.
    The impact of escalating trade tensions between Washington and Beijing is starting to
show up in economic data, with a key measure of Chinese manufacturing activity
disappointing investors, and Trump's latest salvo fueled a rush on Friday to safe-haven
assets such as government bonds and the yen.
    The U.S. dollar has itself served as a safe haven currency in recent times, but on
Friday, it fell 0.34% against a basket of other currencies, hovering below a
two-year peak reached last week.
    For the month, the dollar index was on track for a 0.4% gain, extending its winning
monthly streak to four.
    "The U.S. dollar may be embarking on a major turning point," said Jack McIntyre,
portfolio manager at Brandywine Global.
    The dollar's broad losses on Friday were compounded by comments from senior
policymakers, with the U.S. Federal Reserve Vice Chair Richard Clarida on Thursday
discussing the possibility of rate cuts should the world's biggest economy take a turn for
the worse, though he also said he thought the U.S. economy is in "a very good place".

    U.S. interest rates futures implied traders expect at least one rate cut from the
Federal Reserve by year-end.
    Goverment data on Friday showed a modest pickup in inflation in April, while a private
report indicated a stronger-than-forecast improvement in U.S. Midwest manfacturing activity
in May.
========================================================
    Currency bid prices at 2:55PM (1855 GMT)
 Description      RIC       Last       U.S. Close  Pct      YTD Pct  High Bid    Low Bid
                                       Previous    Change   Change               
                                       Session                                   
 Euro/Dollar      EUR=      $1.1167    $1.1130     +0.33%   -2.63%   +1.1179     +1.1126
 Dollar/Yen       JPY=      108.3900   109.6000    -1.10%   -1.70%   +109.6200   +108.4000
 Euro/Yen         EURJPY=   121.07     121.98      -0.75%   -4.08%   +122.0300   +120.9300
 Dollar/Swiss     CHF=      1.0006     1.0076      -0.69%   +1.96%   +1.0081     +1.0002
 Sterling/Dollar  GBP=      1.2633     1.2606      +0.21%   -0.97%   +1.2638     +1.2560
 Dollar/Canadian  CAD=      1.3520     1.3498      +0.16%   -0.86%   +1.3564     +1.3493
 Australian/Doll  AUD=      0.6938     0.6911      +0.39%   -1.57%   +0.6944     +0.6902
 ar                                                                              
 Euro/Swiss       EURCHF=   1.1176     1.1214      -0.34%   -0.69%   +1.1221     +1.1172
 Euro/Sterling    EURGBP=   0.8840     0.8825      +0.17%   -1.61%   +0.8874     +0.8820
 NZ               NZD=      0.6541     0.6509      +0.49%   -2.62%   +0.6547     +0.6499
 Dollar/Dollar                                                                   
 Dollar/Norway    NOK=      8.7481     8.7691      -0.24%   +1.27%   +8.7945     +8.7372
 Euro/Norway      EURNOK=   9.7718     9.7623      +0.10%   -1.35%   +9.8034     +9.7517
 Dollar/Sweden    SEK=      9.4857     9.5349      -0.13%   +5.82%   +9.5642     +9.4812
 Euro/Sweden      EURSEK=   10.5964    10.6099     -0.13%   +3.24%   +10.6645    +10.5933
 
    
 (Additional reporting by Abhinav Ramnarayan in LONDON
Editing by David Holmes, Stephen Powell and Tom Brown)
  
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