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Dollar strikes 6-week high against yen as risk-on mind-set returns; softens against other rivals

Rachel Koning Beals

Syrian tensions remain under close watch, while a report says the White House plans to tighten trade pressure on China


The dollar gained against haven currencies on Friday, including reaching a six-week high against the Japanese yen, as caution over an imminent Western military intervention in Syria eased and anticipation for a solid round of U.S. corporate earnings helped support the U.S. unit.

Mixed trade against other major rivals, however, left the leading dollar index slightly lower on the day and on track for a roughly 0.5% drop for the week.

The dollar had advanced Thursday for the first time in five days, a sign that risk appetite had returned after a week in which flight-to-safety currencies, including the yen and the Swiss franc, flourished as U.S.-China trade tensions persisted and the possibility of a U.S.-led missile strike on Russia-backed Syria rippled through financial markets.

What are currencies doing?

The ICE U.S. dollar index (IFUS:DX-Y.NYB) , which measures the buck against six rivals, was down less than 0.1% to 89.698, back in the red after Thursday’s gain snapped a four-session skid. The broader WSJ U.S. Dollar Index (CALCULATED:BUXX) , which includes emerging-market currencies, was down 0.1% at 83.71.

The dollar rose against the Japanese yen (USDJPY)(JPY), buying ¥107.59 compared with ¥107.32 on Thursday.

The Swiss franc(USDCHF)(CHF) , another perceived safe-haven currency, was a touch weaker at 0.9614 per dollar compared with 0.9622 late Thursday.

The euro (EURUSD) improved slightly to $1.2337 from $1.2327 late Thursday in New York. The common currency has risen 0.4 percent this week, supported by comments from European Central Bank officials that reinforced expectations toward monetary policy normalization.

Britain’s pound (GBPUSD) , meanwhile, edged higher to $1.4283 compared with $1.4227 Thursday, trading at its highest levels since early February.

Russia’s ruble (USDRUB)(RUB) recovered in European trading hours Friday, trimming a weekly loss to under 6% from week-to-date losses topping 10% just a few days ago, when the currency touched its lowest levels since 2016. One dollar last fetched 61.495 rubles, compared with 61.964 late Thursday in New York.

The ruble has been under pressure amid increasing fears about geopolitical tensions with the West that has whacked its markets, extended a recent recovery. The Russian currency had floundered following new U.S. sanctions against Moscow, offsetting the positive impact on the currency from a three-year high for crude oil prices.

Read: Why the Russian ruble’s 10% drop versus the dollar might not be enough

Check out: President warns Russia to ‘get ready’— hints at U.S. missile strikes on Syria

Elsewhere, the Australian dollar(AUDUSD) , sensitive to shifts in risk sentiment, rose to US$0.7801 from US$0.7754 Thursday.

Read:How Australia got wedged between the U.S. and China in trade war

The Hong Kong dollar (USDHKD)(HKD) stabilized after a volatile week. One buck last bought 7.8500 Hong Kong dollars, mostly unchanged from Thursday’s level.

The unit faced the first foreign exchange intervention by the Hong Kong Monetary Authority since 2015 on Thursday to stave off further weakening of the Asian currency versus its U.S. rival, to which it is pegged.

What is driving the markets?

Trade-war concerns still brew, especially after a report the White House plans to tighten pressure around China, with a sketch of fresh tariffs and a threat to block Chinese technology investments in the U.S. For its part, China is considering lining up allies against the U.S., such as Europe. Details of which Chinese products are targeted could be revealed as soon as next week.

That development comes after a report that U.S. President Donald Trump has directed senior aides to look into the possibility of joining the trade bloc Trans-Pacific Partnership, membership this administration had previously shunned and which could pose a further challenge to China. Data out Friday showed the first monthly trade deficit in China in 13 months.

Also read:Here’s what traders forget as headlines suggest imminent Nafta deal

Meanwhile, Syrian risks remain closely monitored. Britain, France and the U.S. united Thursday around broad plans for a military strike against Syria if needed as they worked to formulate a coordinated response to a suspected chemical weapons attack, U.S. officials said. Trump rattled markets earlier in the week with a tweet hinting that an attack could be imminent, though he and the White House have toned down that talk since, given concerns of drawing Syrian allies Iran and Russia into a bigger conflict.

Bank earnings are likely to sway broader financial markets, perhaps setting the tone for the earnings season just under way. JPMorgan(JPM) , Wells Fargo(WFC) and Citigroup(XNYS:C) are all forecast to post a rise in earnings compared with a year ago due in part to the new tax bill and the boost to business from the stock market volatility.

Read:Expect a strong first quarter for bank earnings, but more questions lie ahead

What are analysts saying?

“The weakening of the safe havens and the strengthening of the riskier currencies suggest that global risk appetite has improved as we approach the closing of the week. Indeed, equity markets were a sea of green, while gold tumbled,” said Charalambos Pissouros, senior market analyst at JFD Brokers.

“Although this week trade tensions between the U.S. and China have eased, and Trump’s language over Syria has softened yesterday, there is a lot to be seen before we assume that this shift back to ‘risk on’ would last for long,” Pissouros added. “Both matters are far from resolved and as we noted on Tuesday, one word that does not describe the U.S. President is ‘predictable.’”

“Should there be further positive headlines about Syria we could see the [dollar-yen] pair rising even further and vice versa,” said Peter Iosif, senior research analyst at IronFX. “Should the bulls have the upper hand we could see the pair breaking the 107.90 resistance line and aiming for the 108.57 resistance hurdle. On the other hand, should the bears take the reins we could see the pair breaking the 106.95 support line and aiming for the 106.43 support barrier.”

Which data are ahead?

A reading on the consumer sentiment index for April is due at 10 a.m. Eastern Time, with a reading of 101.0 expected. A report on job openings in February is scheduled for release at the same time.

Three Federal Reserve officials are lined up to appear Friday. Boston Fed President Eric Rosengren is scheduled to talk about the economy and monetary policy at a Greater Boston Chamber of Commerce event at 8:10 a.m. Eastern.

A little later, St. Louis Fed President James Bullard will speak on living standards across the U.S. at Washington University in St. Louis at 9 a.m. Eastern. In the afternoon, Dallas Fed President Rob Kaplan is expected to address the Odessa Chamber of Commerce luncheon in Texas at 1 p.m. Eastern.

Read:Fed must be on its toes after March CPI data show inflation warming up

Check out:MarketWatch’s Economic Calendar

Which other assets are in focus?

Major stock indexes indicated a higher start Friday and have trended to the upside recently, rising in six of the past eight sessions. As of Thursday, the Dow(^DJI)  and S&P 500(^GSPC)  were each headed for weekly gains of 2.3% and the Nasdaq a rise of around 3.3%.

The 10-year government bond yield (XTUP:TMUBMUSD10Y=X) was at 2.850%. June gold futures(GCM18.CMX) was up 0.2%.

Rachel Koning Beals is a MarketWatch news editor in Chicago.

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