Yen, Swiss franc sink as fading risks take shine off safe-havens

Yen and Swiss franc fell to five-week troughs on Thursday as investors looked for higher-risk currencies, emboldened by a report of German stimulus plans, diminishing chances of a no-deal Brexit and hopes of a trade war breakthrough.

and were also sold in the slide, that pushed the yen as low as 107.49 per dollar, and the franc to $0.9922, with both also losing ground to the euro.

“Over the past 24 hours there has been a move towards more risk-friendly, pro-growth currencies,” Rodrigo Catril, senior foreign exchange strategist at National Australia Bank in Sydney.

“But it is kind of a lull period following a whole stream of positive news last week. We’re in a wait-and-see mode with major risk events like Brexit and trade negotiations being kicked down the road.”

The pound stood just under a six-week high of $1.2385, hit overnight after a British law blocking a no-deal exit from the European Union came into force.

The South Korean won and New Zealand dollar drifted higher, the won holding close to a month high at 1,191.0 per dollar and the kiwi close to a three-week peak at $0.6434.

Exuberance was held back, however, by weak Chinese economic data that hit equities markets, with factory-gate prices shrinking at their fastest pace since August.

Ratings house Fitch on Tuesday cut growth forecasts for Europe and China citing rising protectionism.

The yuan held mostly flat around 7.1169 per dollar.

Traders also remained cautious ahead of a key European Central Bank meeting on Thursday, at which policymakers are expected to ease monetary policy.

The euro was flat at $1.1043, underneath an overnight high of $1.1067 hit following a Reuters report that Germany may set up public investment agencies to boost fiscal stimulus without breaching national spending rules.

“This news caused some people to revise down their expectations for Thursday’s ECB meeting, although I think that’s entirely premature,” said Marshall Gittler, chief strategist at ACLS Global, in a note.

“I think the small rally in EUR today just sets up the currency for a bigger fall on Thursday.”

Market hopes for a trade breakthrough, meanwhile, rested on confidence overnight from U.S. Treasury Secretary Steven Mnuchin. He told Fox television that there had been “a lot of progress” on a U.S-China trade deal and that the U.S. side was “prepared to negotiate”.

The remarks pushed U.S. benchmark 10-year Treasuries to a three-week high where they held in Asian trade. The dollar was flat against a basket of currencies at 98.359.

Sterling barely shifted when Britain’s parliament voted, as expected, to stymie Prime Minister Boris Johnson’s bid for an early election, which prompted him to vow that he would secure a Brexit deal at an EU summit next month.

“While I am loath to go anywhere near the pound, I like what I see in the price action,” said Chris Weston, head of research at Melbourne foreign exchange brokerage Pepperstone Group.

“If GBP/USD kicks up through $1.2354 again, I would be looking for longs, with a stop through $1.2234.”

Source: Reuters