Written by Ray Wee
SINGAPORE (Reuters) – The dollar rose on Monday amid safe-haven demand following the assassination attempt on former U.S. President Donald Trump, leaving the yen struggling to survive despite suspected intervention efforts by Tokyo.
Trading was thin in Asia due to a holiday in Japan, although news of Trump’s shooting dominated the cautious mood in the market and prompted investors to narrow the chances of Trump winning the US election in November.
The assassination attempt could boost Trump’s “strong reputation,” said Jack Ablin, chief investment officer at Crescent Capital. “The specter of political violence introduces a whole new level of potential instability,” he added.
“It’s uncertainty and volatility, and the markets certainly don’t like that. It’s not an environment that anyone wants to see,” he said.
The dollar was strong in early trading, pushing the euro down 0.23% to $1.0885 and the pound down 0.17% to $1.2968.
The risk-sensitive Australian dollar fell 0.18% to $0.6771, while the New Zealand dollar fell 0.35% to $0.6097.
“The market reaction to the Trump presidency has been characterised by a stronger US dollar and a rising US Treasury yield curve, so we may see some of that in the coming week if his election prospects are assessed to have improved further in the wake of this incident,” said Rong Ren Goh, portfolio manager at Eastspring Investments.
The dollar was little changed against a basket of currencies, settling at 104.28.
Cash U.S. Treasuries were off in Asia on Monday due to a holiday in Japan, but 10-year Treasury futures were slightly lower, suggesting yields will rise when cash trading begins later in the day. Bond yields move inversely to prices.
Under a Trump presidency, market analysts expect tighter trade policy, fewer regulations, and more flexible climate change regulations.
Investors also expect an extension of corporate and individual tax cuts that expire next year, raising concerns about a higher budget deficit under Trump.
Intervention monitoring
Elsewhere in Asia, the yen also remained on traders’ radar after Tokyo was believed to have intervened in the market to support the struggling Japanese currency last week.
Against the dollar, the yen fell 0.3 percent to 158.36 yen, after rising to a nearly one-month high of 157.30 yen per dollar on Friday.
Bank of Japan data on Friday indicated authorities may have spent as much as 3.57 trillion yen ($22.4 billion) on Thursday in the latest round of intervention this year.
Japan’s finance ministry has so far remained tight-lipped on whether it was behind the sudden and sharp rise in the yen’s value, merely repeating that authorities are prepared to take necessary action in the foreign exchange market.
Analysts said Monday’s holiday in Japan could provide the perfect conditions for authorities to strike again amid thin liquidity, similar to the rounds of intervention in April and May.
“The Treasury’s confirmed intervention in the foreign exchange market in April and May demonstrated that policymakers are prepared to be cautious in timing their moves,” said Jane Foley, head of foreign exchange strategy at Rabobank.
“In order to achieve more ‘return on investment’, intervening in the foreign exchange market under calm conditions or after weaker US economic data appears to be a sensible move.
“The intervention this spring indicated that the finance ministry was fully prepared to act outside of normal trading hours in Tokyo.”